New Florida condo rules: Developer buyouts offer lifelines to owners

The deadline for associations to receive their completed structural reserve studies is Dec. 31. Across the state, condo owners and their associations are going to soon be waking up to the reality that their financial situation is more tenuous than previously believed. The condo market in Florida is set to shift dramatically and condo owners need to act quickly to ensure the tides don’t turn too far against them. 

Changes to the condominium laws have been looming over Florida’s condo market for several years. In 2022, the Florida legislature enacted changes to the Condo Act that would require all structures above three stories to have structural reserve studies done, and, starting in January of 2026, associations shall be required to hold the necessary capital needed for any repairs or maintenance required.

Rescuers search through the rubble of the Champlain Towers south condo collapse in Surfside in 2021. In the aftermath, tough new condo maintenance laws were enacted.

These reserves aren’t chump change; we’re talking about multimillion dollar repairs— and that’s because the money needs to cover repairs that need to be made immediately plus repairs that are required within the next 10 years.

The associations can raise funds for repairs, by either passing special assessments or by increasing the monthly maintenance fees, either of which will be costly to the unit owners. Many condos will experience both at the same time.

It’s a recipe for financial disaster that’s going to impact more vulnerable families first. People on fixed incomes and middle class families — a group that makes up a large percentage of Florida’s condo owners — are going to find themselves with assessments that they can’t afford. Moreover, for many older projects the increasing cost to repair and maintain are not justified by the market value of the units, which for many projects are decreasing. 

Florida condo owners, hear this bluntly: the window to sell has probably closed. Existing condo sales are down significantly when compared to last year and the median price of a condo over 30 years old has decreased.  

Even if buyers were looking for condos with sky-high COA fees (which they’re not), banks are going to be hard-pressed to consider lending on a building with such upside down economics as some of these units face. More sellers are coming to the market but buyers simply aren’t interested. 

Many condo unit owners have been able to get out by doing a bulk sale of their units to a developer. This makes sense because the land under an existing building is typically very valuable because it can be developed into a much more expensive project.

Some savvy condo associations were already anticipating this likelihood months ago; 2023 was a banner year for condo owners selling to developers. Bulk condo unit acquisitions, though difficult to pull off, are likely going to be well worth it for the condo owners that can get it done. 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 condo owners stop seeing themselves as property owners, and start seeing themselves for what they are: landowners. 

Increasingly, however, 100% alignment of a building's owners — or as close to it as is required by the condo’s original termination provision — is going to be necessary for condo owners looking to get a deal done.

With sellers in a tight spot and developers hardly better off, the Florida real estate market is teetering on the edge. The promise of a brighter tomorrow still exists — but it may take a few months or even years for the legislature to fully enact the needed Condo Act reforms. 

Condo owners need to be smart with how they bring their properties to market. Buildings need to be putting together leadership committees with trusted neighbors who are keyed-in to the concerns and desires of the community. This leadership committee needs to prioritize transparent communication; conversations they’re having with lawyers and potential buyers need to be communicated effectively and honestly to fellow owners.

It’s do or die time for condo owners, who need to come together to stave off financial collapse. For many condo owners, united you stand and divided you fall — and the time to stand is now. 

Joseph Hernandez is a real estate partner at Miami-based Bilzin Sumberg.