BEFORE WE BEGIN – THIS IS NOT LEGAL ADVICE AND YOU
SHOULD CONSULT AN ATTORNEY IF YOU HAVE LEGAL QUESTIONS.

PRE 2022 – REQUIREMENTS AND STATE OF AFFAIRS:

  • There was nothing requiring Condo Associations to regularly inspect the structural integrity of
    the condo buildings and the existing laws permitted Associations to completely waive
    assessment and pool assessments for structural funding – resulting in larger assessments in
    crisis situations.
  • Many Florida condo owners have juggled this fact by playing a certain “Condo Roulette”
  • I’ll flip it and sell before the assessment, or I’ll be dead and gone whenever that arises…
  • National Problem – Building boom over the last 50 years – will be necessary to address.

SURFSIDE STORYLINE – To Set the Scene: Champlain Towers South (1 of 3 Towers) built-in 1981

  • 12 stories; 136 total units
  • 39 years old
  • Owners had previously noted major structural concerns.

June 24, 2021 – 1:00am – Parking Deck/Pool then Residential Units

  • Approximately 1/3 total collapse
  • At least 98 casualties
  • $1 billion settlement for families of victims
  • $96 million in settlement for non-fatalities.
  • Post-Mortem Found: $15mm Repairs + $1mm Reserves.
  • Friedman & Associates Architects, Inc. Breiterman Jurado Associates: Supporting columns 1/2 the required load– i.e. too small.

Surfside – Collapse of the Condo Market or Prime Opportunity: FL CONDO 2019 STATISTICS

  • Approximately ~ 1.5 million Condos – 61% (over 900k) are already 30+ years old.
  • About 10% of all FL Residents live in 30-year-old Condos – aging with structural problems.
  • Almost 40% are located in Miami-Dade/Broward – particularly susceptible due to hurricanes
  • Half of condo associations have inadequate financial reserves/ waived entirely.

GOV. DESANTIS & THE LEGISLATURE – SB 4D (2022) and SB 154 (2023) (the “Band-Aid bill”)
Bill, while it has many parts – but will focus on the 2 Main Portions: CAN BE DESCRIBED IN 2 MAIN PORTIONS – SIRS and MILESTONE INSPECTIONS. these 2 required for any condo over 3 stories tall.

MILESTONE INSPECTIONS –

Mandatory performed by Dec 31st in the year the condo reaches the 30th year

  • Roof /Waterproofing/Exterior Painting
  • Load-bearing walls/structural members o Windows & Exterior Doors

County records shall serve as the date. Time period may be accelerated for aggravated
circumstances by the local enforcement agency.

Phase 1 and Phase 2

Phase 1 Inspection

  • Licensed engineer/architect or team
  • Visual Qualitative Inspection of habitable/non-habitable areas including major structural
    components and provide an analysis of structural integrity.
  • “Substantial Structural Deterioration” – distress or substantial structural weakness negatively
    affecting the general structural condition and integrity of the building – NOT “surface
    imperfections” like cracks, distortion, sagging, deflections, signs of leakage, or peeling finishes;
  • Unless such Phase 1 or Phase 2 inspector finds that those “surface imperfections” are signs of
    “substantial structural deterioration”.
  • If any issues are raised, go to Phase 2.

Phase 2 Inspection –

  • Any issues identified in Phase 1 must be under destructive/non-destructive testing
  • Recommend a program for fully assessing and repairing distressed and damaged portions

“SIRS” – review of reserve funds

  • for any condo over 3 stories tall + Condos, 1 addressing ALL major repairs and replacements 2 to
    common elements.
  • SIRS must include the following items/categories:
  • Roof o Waterproofing/Exterior Painting
  • Load-bearing walls/structural members o Windows & Exterior Doors
  • Fireproofing/fire protection systems o Any other item > $10k deferred maint.
    or replacement – if failed would negatively affect the above.

    • Electrical
    • Plumbing

Effective 12/31/24 – Cannot WAIVE and cannot POOL/DESCRIBE ROOF: Condo associations must have budgets updated to match SIRS by 2025

Surfside – Collapse of the Condo Market or Prime Opportunity: MILESTONE PROCEDURE

  • Self-report DBPR Div. Condominiums (i) # buildings 3 stories or higher; (ii) total # of affected
    units
  • County Reports and sends a Notice
  • COAs must notify owners w/i 14 days of receipt.
  • Phase 1 (180d), if needed Phase 2 (180d), then 365d to commence construction.
  • CRUNCH – 2 YEARS FROM NOTICE OF MILESTONE INSPECTION TO COMMENCE REPAIRS

Surfside – Collapse of the Condo Market or Prime Opportunity: How does this affect the SWFL Market?

  • Lee Co. 2,592 Bldgs with 30,369 Units
  • Collier Co. 2,114 Bldgs with 34,453 Units
  • Sarasota Co. 1,408 Bldgs with 19,314 Units
  • Charlotte Co. 533 Bldgs with 5,443 Units

The average Sq Ft Price for $$$ Condos – is $1,000 – $2,000 maybe up to $2,300.

How will this affect these assets? – Get back to Basics – Location… Location… Location

Places near the water, on the beach – served by some other high-value amenity dirt will control
RE: Surfside: DAMAC International purchased for $120 million after payouts

  • Build 52 luxury condo units from 4,000 to 9,000 square feet.
  • Avg. Cost – $25 million. If fully sold = $1.3B. *(New $/SqFt = ~$3,800 per SqFt) 3
  • Compare this to the Sale – Immediately before the collapse:
  • 3Bd/2Ba – 1,748sq/ft – SOLD 6/16/21 – $710k ($406/SqFt)
  • 2Bd/2Ba – 1,683sq/ft – SOLD 2/28/21 – $800k ($475/SqFt)

Developers’ Opportunity – Reports are coming in about developers buying up the aging waterfront

  1. Only residential condo and co-ops, not including non-residential (i.e. office) greater than 3 stories & residential portions of mixed use hi-rise.
  2. Not including elements that have a life expectancy of over 25 yrs – but recommendations may be made.
  3. WRLN- Miami (https://www.wlrn.org/south-florida/2023-09-11/surfside-condo-collapse-memorial-garbage)

Assessments – Lien – then Foreclosure – could cause a soft market where there isn’t the market for a teardown and where owners can’t pay their assessments.

  • Fixed Income
  • Many Don’t have a Mortgage
  • THEREFORE inability to pay large lump-sum assessments and foreclosure wave that may
    result.

Doom Gloom ??? – possibly

In Addition, there are Other Factors/options:

  • Hurricane Ian Effects – Many are already tapped out.
  • Increased Insurance – Some COAs are seeing rates rise as much as 50% to 10x.
  • Financing on Expected Assessment Income – creative lending to finance immediate repairs.

A NOTE ON CONDO TERMINATIONS

  • Termination – 80% Approval, 5% can block, and 24mo. waiting period btw plan votes.
  • Economic Waste – The cost to rebuild is greater than the total value. Lack of case law on the topic.

Buying / Selling:

  • SIRS must be kept on file with the COAs for at least 15 yrs after completion.
  • Unit Owners AND their representatives can inspect/review; so can renters.
  • Estoppels and Review of reserve accounts – since Seller has access – make this a contingency.

Association Budget, year-end assessment; Common Area Insurance, Board Minutes
Conclusion: May take 4 or 5 years to see the knock-on effects fully play out.

  • Probably will push prices higher overall.
  • Credentialed professionals making the reports.
  • “Useful Life Calculations” – keeping current and updated; inflation, current price data.
  • Are the reserves kept up – i.e. has COA kept to the budget?

 Dylan R. Shea, Esq. GUARDIAN LEGAL

Dylan Shea is an experienced and knowledgeable attorney, and he works with clients to develop comprehensive plans that will help to secure and protect their assets for present and future generations.

With his expertise, Dylan helps his clients understand their legal rights, financial goals, and other important factors involved in protecting their families. With Dylan’s years of experience, clients can trust that their interests are being represented with the utmost care and concern. He takes the time to fully understand the needs of his clients and provides individualized solutions tailored to their unique situations.

As an advocate for his clients, Dylan works diligently on their behalf to ensure that all of their legal needs are met. He is committed to providing exceptional service and helping them protect their legacy for generations to come.

Click here to Contact Dylan Shea at Guardian Legal

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You can also call them: 239 530 4300

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