Lots Of Questions, Still No Answers for South Florida Condo Owners

(Photo: Kian Lem/Unsplash)

There are still no answers as to why the Champlain Towers South condo in Surfside, Florida tragically collapsed, causing almost 100 confirmed fatalities and anguish for uncounted South Florida families.

Investigators will need months if not years to determine what really happened, and why.

In the meantime, local condominium owners, construction and engineering experts, government officials, and in fact many of our clients, try to make decisions about next steps amid speculation as to how things may change in the future, and how South Florida could be affected.

Here’s what local condo owners could expect, according to expert reports:

  • Insurance coverage in older buildings is likely to become more expensive and harder to obtain, both with respect to the coverage condo associations buy to cover the building itself, and also for the coverage unit owners purchase to protect interior contents. Two-thirds of condo buildings in South Florida are at least 30 years old, according to research by the South Florida Sun Sentinel, and we know the overall residential insurance market in South Florida is already under severe pricing pressures due to climate change fears and above active hurricane seasons.
  • Insurers may tighten underwriting standards to request more extensive structural reports before offering coverage for hi-rise condos, as reported by local media. That may in turn lead to more expensive repairs and improvements required of condo associations, which will be passed on to owners in the form of heightened reserves or costly assessments.
  • Only two counties in Florida – Miami-Dade and Broward (Fort Lauderdale) – call for structural and electrical safety inspections for buildings at the 40-year mark and every 10 years thereafter. The Surfside tragedy is prompting debate over whether recertification should become the norm in other counties as well. Although intended to protect inhabitants, recertification and/or enhanced safety standards may have the unintended consequence of increasing ongoing costs to condo owners.
  • Potential condo buyers should do their due diligence both in terms of the building’s finances but also its structural integrity. As anxious as you may be to score a real estate deal, think twice about waiving physical inspections or a review of condo documents, which can help illuminate the state of the building’s reserves, financial management, structural issues, and potential repairs and assessments. If current owners consistently push back against making needed repairs or improvements, or don’t have the financial means to contribute, you may want to think carefully about buying in. Financial journalist Robyn Friedman details several due diligence steps to take before purchasing in her July 16 article for The Wall Street Journal. As always, we strongly recommend that clients rely on the services of experienced real estate professionals and a real estate attorney when they are buying or selling property to make sure their purchase decision is based on a clear understanding of all the relevant facts.
  • Over the years, we have observed that potential home buyers often underestimate the ongoing costs of maintaining a property, whether it’s a single family home or beachfront hi-rise. This often leads to them feeling ‘house poor’ due to higher than anticipated monthly fees and assessments, taxes, and typical repairs. We counsel buyers to budget 1-2% per year in ongoing maintenance, in addition to homeowner’s or condo association fees. So, for example, a $500,000 property might rack up $5,000 to $10,000 per year on average in maintenance. You may go years without any major expenses, but eventually those new appliances, flooring, windows or bathroom renovations will cost you (as will a multi-million dollar special assessment, like some hi-rises are facing). Our advice: just because you can qualify for that mega-mortgage and buy that big property doesn’t mean you should buy it. Too much house can become an anchor around your neck. Budget carefully before buying and be realistic about ongoing maintenance.
  • If you already reside in a beachfront condo, be patient. It will take time to understand what truly caused the Surfside collapse, and what that means for other buildings up and down both Florida coasts. After hurricane Andrew, many Florida counties revised building codes to what has now been called “some of the strictest in the country.” This could be another watershed moment where those of us residing in South Florida have to make important decisions about protecting ourselves and our property from ongoing climate challenges. It might be our little slice of paradise, but sometimes the upkeep is anything but heavenly.

 

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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