Florida Legislative Session Ends With 'No Good News' For Condo Owners

With warnings that a “doom loop” was on the horizon for owners of millions of Florida condos, state lawmakers went into their annual legislative session with pressure to act.

While the two houses of the Florida Legislature passed a bill that buys some condo associations a little more time to meet new inspection and funding mandates, industry insiders say little has been done to avert what many predict will be a crisis in the market.

Under Senate Bill 1742 and House Bill 913, condo associations would have an extra year to complete structural integrity reserve studies and would have financial flexibility to use loans or lines of credit to contribute to the reserves.

“I think that the intent was good, but the reality is that the major item that everyone wanted was financial relief,” said John Cadden, the managing principal of Condominium Advisory Group. “I don't think this provided any straightforward financial relief to any association.”

Following the 2021 Surfside collapse that killed 98 residents, Gov. Ron DeSantis signed Senate Bill 4-D into law in 2022, which requires condo buildings that are three stories or taller and at least 30 years old to complete structural inspections every 10 years and maintain reserve funds by a Dec. 31, 2024, deadline.

The law has pushed the market for older condo units toward a financial cliff as assessments began to roll in and aging and poorly maintained buildings faced ballooning repair costs, declining values, rising condo association fees and insurance premiums.

Condo associations dragged their feet on reserves studies — only about 44% of condo owners in Miami-Dade County, 41% in Broward County and 28% in Palm Beach completed the requirements, according to the Miami Association of Realtors.

“That sort of forced an extension, basically giving people more time to try and complete the study,” said Peter Zalewski, founder of Miami-based real estate consultancy firm Condo Vultures.

The legislation that passed last week, if signed into law, wouldn’t change the state’s core requirements around building safety and long-term planning, but it would extend the SIRS deadline by a year to Dec. 31, 2025.

Buildings that are controlled by unit owners can vote to pause or reduce reserve contributions for up to two consecutive years and focus on milestone inspection-related repairs. Following that, associations would have to complete a new SIRS and resume contributions based on updated needs.

“Without moving one step backwards on safety, this bill provides options, flexibility and relief so condo owners and associations can prioritize the most important repairs first, including safety issues identified during milestone inspections,” Sen. Jennifer Bradley, a Republican from the Jacksonville area who sponsored the legislation, said in a statement. “They can then take a pause to catch up by reducing reserve funding temporarily, or obtaining a line of credit in lieu of reserves for a limited period.”

For a budget made on or before Dec. 31, 2028, condo associations would be able to fund reserves through loans or lines of credit with majority owner approval, unless the building is developer-controlled.

But that is if they can even get financing — which many struggling associations may not qualify for when lenders evaluate whether their owners can realistically repay special assessments or higher monthly dues, Bilzin Sumberg attorney Joseph Hernandez said.

Interest rates on loans that condo associations would take out are expected to rest at about 7%, on top of paying repairs, Zalewski said.

“You made it easier to get a loan,” Hernandez said. “But that's not going to help certain associations that are in that situation.”

One solution that wasn't effectively addressed in the bill is the process to terminate a condo association to clear the way for a developer to buy out the building and redevelop it. 

Developers have grown hesitant to pursue condo terminations because unclear legal standards, especially those requiring 100% or nearly 100% owner approval, have led to the fear of drawn-out litigation, Hernandez said.

Those concerns were heightened when South Florida-based developer Two Roads had a deal to terminate the Biscayne 21 condominium in Edgewater, but a judge sided with 10 of 192 unit owners who wanted to block a buyout deal. The parties still have yet to reach an agreement, The Real Deal reported in February.

While the holdout unit owners and Two Roads wait for the court to decide whether it will grant a hearing, Hernandez speculated that the courts were even hoping the legislature would give some direction with terminations.

Without a pool of developers pursuing terminations and with looming special assessments for a majority of older condo buildings, owners of these units are left with few good options.

About 17,700 out of 25,315 condos on the market, or 70%, in South Florida are at least 30 years old, according to a January report by Condo Vultures. Zalewski said he believes aging condos will drop in value by about 40%.

As condos 30 and older continue to decline in value and buyers steer clear due to fears of massive special assessments and repair fees, selling individual units has become nearly impossible, Hernandez said.

If owners can't sell or cover the cost of special assessments and increased fees, they could be subject to foreclosure.

“We don't want a bunch of dysfunctional, distressed condos that are filing bankruptcy and being run by receivers — that's not good,” Hernandez said. “So I am personally disappointed that we didn't see more.”

But the bill does clear up operational and procedural issues for condo owners.

It allows electronic voting and videoconferencing for board meetings, budget meetings and unit member meetings. It also would require written disclosures from architects, engineers and licensed contractors who bid on SIRS and milestone inspections.

The bill is a lifeline, Zalewski said, but costs are still rising. Even if condo associations complete the required work, it doesn’t guarantee value in a saturated market where others are offloading to avoid repairs.

“There’s virtually no good news for anybody in a condo in the state of Florida,” Zalewski said.

The final version of HB 913 and SB 1742 now awaits DeSantis' signature. A spokesperson for the governor declined to comment on whether or when he plans to sign it.