Developer buyouts provide lifelines for condos

The deadline for receiving completed structural reserve studies for associations is December 31st. Across the state, condominium owners and their associations will soon discover that their financial situation is more precarious than previously thought. The Florida condo market is set to change dramatically and condo owners need to act quickly to ensure the tide doesn’t turn too much against them.

The Florida condo market has been threatened by changes to condo laws for several years. In 2022, the Florida Legislature enacted changes to the Condo Act that would require structural reserve studies to be completed for all buildings over three stories, and beginning in January 2026, associations must have the capital necessary for any repairs or maintenance necessary.

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These reserves are not chump change; We’re talking about multi-million dollar repairs – and that’s because the money needs to cover repairs that need to be done immediately as well as repairs that need to be done within the next 10 years.

Associations can raise funds for repairs by either adopting special assessments or increasing monthly maintenance fees, each of which is costly to unit owners. Many condos will experience both at the same time.

It’s a recipe for financial disaster that will hit more vulnerable families first. People on fixed incomes and middle-class families — a group that makes up a large percentage of Florida condo owners — are facing tax bills they can’t afford. Additionally, the increasing repair and maintenance costs on many older projects cannot be justified by the market value of the units, which is declining on many projects.

Florida condo owners, hear this bluntly: The window to sell is probably closed. Sales of existing condominiums have declined significantly compared to last year and the average price of a condominium that is over 30 years old has fallen.

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Even if buyers were looking for condos with extremely high COA fees (which they aren’t), banks will have a hard time considering lending on a building whose economics are as topsy-turvy as some of these are units is the case. More and more sellers are entering the market, but buyers are simply not interested.

Many condo owners were able to free themselves from this by selling their units in bulk to a developer. This makes sense as the land beneath an existing building is usually very valuable as it can be developed into a much more expensive project.

Some savvy homeowners associations anticipated this probability months ago; 2023 was a record year for condo owners selling to developers. While purchasing large condos is difficult to accomplish, it will be well worth it for condo owners who are able to do so. Because of the value of the underlying land, in many cases developers can actually offer unit owners significantly more than the market price of the unit. It’s time for condo owners to stop seeing themselves as property owners and start seeing themselves as what they are: landowners.

Increasingly, however, it is becoming necessary for condo owners seeking to close a deal to have a building’s owners agree 100% – or as close to it as the condo’s original termination provision requires.

With sellers in a tense situation and developers doing little better, the real estate market in Florida is on the brink. The promise of a better future still exists — but it may take a few months or even years for lawmakers to fully implement the Condo Act’s needed reforms.

Condominium owners need to be smart about how they put their properties on the market. Buildings need to have governing bodies composed of trusted neighbors who are committed to the concerns and desires of the community. This governing body must prioritize transparent communication; Discussions they have with lawyers and potential buyers must be communicated effectively and honestly to the co-owners.

It’s a matter of life or death for condo owners who must come together to stave off financial collapse. For many condo owners, united you stand, divided you fall – and now it’s time to stand together.

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Developer buyouts provide lifelines for condos

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