Tag: surfside

Florida’s New Condo Inspection Law Protects Real Estate Owners — at a Cost

Last year’s partial collapse of a condominium building in Surfside, Florida, that tragically killed 98 people, led to a call for stricter inspection regulations. Gov. Ron DeSantis responded recently by signing a law with much tighter inspection requirements.

Under the new state law, all residential building three stories or taller must undergo a detailed structural inspection after 30 years and then every 10 years after that. Buildings within three miles of the coast — where salty ocean water can be highly corrosive to structural components — face even tougher rules. They have to be inspected after 25 years and every seven years after that.

Whenever structural damage is found, buildings are required to undergo a more thorough secondary inspection. The results of the inspections have to be made available to unit owners and local government officials.

In addition to the inspection rules, the new law requires condominium associations to evaluate their reserve funds every 10 years to make sure they have enough cash to cover the cost of major repairs.

The new law, which is due to go into effect in January 2025, could lead to a substantial increase in condo fees and special assessments. Depending on the size of a building, professional engineering inspections can cost tens of thousands of dollars. And buildings that have not maintained sufficient reserves could face large special assessments to cover the cost of repairs identified by structural engineers and/or to bring underfunded reserves into compliance.

With sea level rise and stronger tropical storms adding stress to buildings located near the coast, real estate owners and buyers in Florida should be encouraged that the new law will improve safety and reduce the odds of another Surfside-like collapse. But, for budgeting purposes, they need to be aware of a building’s age, inspection status, potential repair issues, and reserves status. Condo board members, meeting minutes and financials should provide a clear picture of a building’s situation.

Other states may have inspection and reserves requirements similar to Florida’s that need to be considered when owners and buyers are involved in coastal real estate located within their borders.

New Miami-Dade County Law Makes it Easier for Buyers to Evaluate Condo Building Maintenance and Reserves

The tragic collapse of a the condo building in Surfside, Florida, that claimed 98 lives continues to force changes in the way real estate is bought and sold all across the country. This month, Freddie Mac and Fannie May, the quasi-government organizations that back many of the nations mortgages, began requiring condo associations to answer detailed questionnaires about a building’s maintenance, repairs, and reserves to determine overall safety and financial soundness as part of the process lenders use to evaluate mortgage applications.

On Tuesday, the Miami Dade County Commission took transparency a step further and unanimously passed a new law requiring condo and homeowner’s associations to file detailed financial and maintenance records for inclusion in an online library. Currently, Florida real estate law requires sellers to provide buyers with these documents only upon request AFTER a sales contract is executed. The buyer is then given three days from receipt of the information to cancel the contract if they don’t like what they see.

Some real estate agents told the Miami Herald they’re relieved that the new database is being created. They complained that condo associations and homeowners associations often made it difficult for sellers and buyers to access the relevant documents and too often they were delivered incomplete.

One potential shortcoming of the law is that the associations are only required to file the documents on an annual basis, which leaves the possibility that the information will be outdated by the time a buyer receives it. This could lead to a buyer not being aware of such critical information as a costly special assessment that is under review or approved since the last annual filing. Note to Buyers: Still request the latest condo docs and financials when conducting a review.

Overall, the move toward greater transparency regarding real estate is a huge plus for buyers and owners, especially when sea level rise is already causing maintenance and funding challenges for condo developments located on or near the coast. Regardless of a coastal state’s laws, buyers everywhere need to take a look at condo association and homeowner’s association documents and financials before they commit to close a deal.

Coastal Condo Boards have a Powerful New Ally in Building Maintenance Battles with Owners: Mortgage Providers

In many coastal condo buildings and developments, one of the hardest challenges for condo boards is convincing owners to cover the cost of routine and even emergency building maintenance. The days of such battles are likely over as condo boards gain a new ally: mortgage providers.

According to an article published today in The Wall Street Journal (“Surfside Tower Collapse Makes Buying Condos More Complicated”), in light of the tragic collapse of the oceanfront building in South Florida last summer — possibly due to owner reluctance to fund maintenance projects — mortgage backers Fannie Mae and Freddie Mac will no longer buy loans involving condos located in buildings that need significant maintenance or that have safety issues. Fannie Mae and Freddie Mac spokespeople told the newspaper the new requirement will ensure buildings are safe and maintained responsibly. (It’s clear that it will also increase the odds that a typical 30-year mortgage will be payed off instead of abandoned in the event of a building condemnation or collapse.)

Fannie Mae and Freddie Mac have already given lenders detailed questionnaires that condo boards have to complete regarding a building’s condition. Their answers are being used in the loan approval process. The Journal report says that the new requirement is already slowing down the loan approval process as building managers and board members don’t always have the facts they need to answer the questions accurately or completely.

Fannie Mae and Freddie Mac’s new policy regarding building maintenance will have several consequences for condo owners and buyers. Condo owners are going to have to get used to the new reality that in order to sell their condos to buyers using loans and, ultimately, to protect their property value, they will have to become more amenable to paying higher condo fees and special assessments to cover the cost of routine inspections and routine and emergency maintenance projects. Buyers, on the other hand, are going to have to become more aggressive in gathering information on condo building maintenance at a property of interest BEFORE they submit an offer and mortgage application to avoid submitting offers on condos that will likely fall through due to building maintenance deficiencies and/or safety issues.

Sea level rise is another factor that’s sure to complicate the building maintenance issue. Condo buildings located near the coast typically require more maintenance than buildings located inland. Salty ocean air and seawater can be very corrosive when they come into contact with structures. Exposure to them often results in the need replace stucco, concrete and rebar, especially in buildings with balconies. As sea level continues to rise, buildings will become increasingly vulnerable to these destructive forces of nature.

The question for owners and buyers to ponder at this point is will owners have the resources to fund costly repairs necessary to ensure buyers can still purchase condos using loans. If not, some coastal condos could actually lose value due to a locked-up market.

NOTE: The Miami Herald also published a detailed article (“Prompted by Surfside Tower Collapse, New Condo Lending Rules Target Buildings in Need of Critical Repairs”) about this issue that’s protected behind its paywall.

The Surfside Florida Tragedy Will Change How People Handle Coastal Real Estate

As a long-time resident of South Florida, this is the most difficult post I’ve had to write for SeaLevelRiseRealEstate.com. My condolences to the family and friends of those who lost their lives in the tragic Surfside, Florida, high-rise building collapse. May they find comfort in the memories of their days together.

Although the investigation into the disaster has barely begun, structural engineers analyzing potential causes have suggested that rainwater and maybe even sea level rise-driven, salty ocean floodwater that pooled on a flat pool deck may have damaged the building’s concrete and steel reinforcement structure to the point that the pool deck collapsed into the garage and brought the floors above with it. For a few years, structural engineers had warned the condo board that the water damage needed to be fixed immediately. The condo board says that it did its best to convince the residents that they needed to fund the repairs, but it was a slow process. Investigators will have to sort out the details.

Regardless of the ultimate cause of the catastrophe, the lessons are clear for buyers and owners of real estate in coastal communities. They need to practice due diligence when evaluating coastal properties.

When buyers are purchasing condos, townhouses or homes in seaside communities, they need to have the structures fully evaluated by licensed and experienced home inspectors. When they receive the inspection report, they need to read it in detail and ask the inspectors to explain any deficiencies and whether it’s still worth purchasing the subject property.

In cases that involve homeowner’s associations or condo boards, buyers need to treat the interview process as not only an opportunity for the board to become familiar with them but as an opportunity for them to find out if the board is managing the property well. To do this, buyers need to get a copy of financial records and annual reports and actually read them to see if the association is properly funded or burdened with debt and holding enough reserves to cover the cost of anticipated maintenance. They also need to find out if the property is properly maintained, if there are any ongoing maintenance issues, and if there are any anticipated maintenance projects — and how much each resident will have to pay toward the projects. Special assessments can cost each owner tens of thousands of dollars. Another crucial part of this due diligence process is asking the board for a copy of recent property inspections, whether they were conducted by a private firm or city department.

Both salt-water infused rain and sea level rise flooding can damage structures. Buyers need to find out in writing from sellers or the board whether or not the property is subject to sea level rise flooding now or will be in the near future. They also need to know what, if anything, is being done to control the problem and how much it will cost.

Buyers aren’t the only ones who need to practice due diligence. Owners of coastal real estate need to be pro-active when it comes to the maintenance of what is essentially their home. They have to get involved either by becoming board members or becoming active participants — and problem solvers — in the board’s deliberations. When a structural engineer identifies a problem that needs to be addressed immediately, they need to pressure the board and other residents to get on board and get it repaired.

Owners also need to pay attention to the threat sea level rise flooding poses to a property and what the board intends to do to address it. If fellow residents aren’t interested in properly maintaining a building, it might be time to sell.

Over the years, I’ve rented condos in buildings that were well managed and some that weren’t. One condo building I lived in a block from the ocean was so poorly maintained that saltwater intruded through the stucco exterior causing so much damage practically the entire structure had to be replaced to make the building habitable. Another building I’ve lived in was so well managed that the owners fixed slight deficiencies before they caused any noticeable damage. Condo and homeowner’s association fees for some buildings might seem high on the short-term, but if the money is being used to avoid costlier problems down the road, the investment is clearly worth it.

Over the past few months, I read an article in the Charleston Post and Courier that said one of the first questions buyers in Charleston — a city that’s being impacted by flooding from sea level rise, storm surges, and heavy rain — were asking is “Does this property flood?” A real estate agent quoted in a Miami Herald article said agents in her city rarely if ever asked that question — this despite Miami being ground zero for sea level rise flooding. The Surfside tragedy will likely result in buyers being much more likely to ask questions regarding flooding and building maintenance. Condo and homeowner’s association boards and owners in their building are going to have to be much more pro-active regarding building maintenance to protect their investment and their lives.

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