THE HOUSING NUMBERS JUST DON’T ADD UP

I really hate to be a Debbie Downer, but I have never been more afraid of an economic collapse in Florida, especially South Florida, as I do now.  I couldn’t care less about the statistics that get reported about whether foreclosures are going up or not.  I’m telling you that they are.  I know because process servers are at my office every day, serving my office as registered agent for the condo or HOA where the first mortgagee is foreclosing.

In other words, even though The Florida Legislature fell asleep at the when this year and did not pass a single change to our condominium statute and require full funding of reserves or partial funding of reserves, or even mandatory inspections, unit owners are being foreclosed on any way.  They already can’t afford to pay their mortgages and regular assessments.

Clearly, $5.00 per gallon gasoline and rising food prices are causing unit owners to already decide between eating food or paying their condo bill.  Well…..food is winning.

The rise in condo insurance rates seems criminal.  We’re seeing condominiums get hit with increases of 50%, 100% or even more than 100%.  I have even heard stories of some condominiums having their premiums triple in a one year period.  Here’s the bottom line when it comes to states like Florida, Texas and Louisiana.  All of these states contribute to the National Flood Insurance Program, meaning that the citizens of these states pay for people that have their homes flooded in Arkansas and California and every other state.  However, there is no National Hurricane Insurance Program, so only the citizens of hurricane prone states have to pay for hurricane insurance premiums in their states.  They bear the entire burden when it comes to hurricanes, but the risk of flooding and Flood Insurance is spread out among the 50 states.

Now, just think what’s going to happen when more and more condos in Dade and Broward get to the 40 year mark and require recertification of their electrical and structural systems.  Think about that requirement eventually being required for every county in Florida.

Just think about what’s going to happen when Florida eventually passes a law that makes it impossible to waive the funding of the condominium reserve accounts.  It will no doubt mean increases of hundreds of dollars per month per owner throughout the state.

What’s going to happen when by January 1st, 2024 every condominium of six stories or more is required to have either fire sprinklers or an Emergency Life Safety System.

So the best thing to do now is simply sell your unit and bail on the condo, right?  Well, good luck finding a buyer now that mortgage rates are over 5% and in a post Champlain Towers world, buyers are smarter and want to see the condominium’s financials and inspection reports before buying.  And by the way…….. Fannie Mae and Freddie Mac won’t back mortgages in a condo that is not both structurally and electrically in good shape, but also funds a reserve account.  In other words, it’s getting harder to bail out, even if you want to.

Here’s the good news.  Developers and investors from foreign countries are sitting on piles of cash.  So, you may get lucky and a developer may try and buy out every unit in your condo so they can terminate it, knock it down and build a new condo that you will never be able to afford to move into.  Or, they will try to acquire enough units to control the make up of the Board, pass special assessments and force you out anyway.  Again, that’s the good news.

The Florida Legislature in large part is to blame.  Developers who make large campaign contributions rule the roost in Tallahassee.  In return, the condo laws allow developers to waive reserves while they are trying to sell units, allowing them to create fake, unrealistic budgets so that they can sell units easily to unsuspecting buyers who have no idea what they’re really buying into and what the real cost of living in the condominium will be over time.  This needs to end and end now.

I feels sorry for anyone serving on a Board at this time or in the near future.  You guys will have no choice but to tell your unit owners that assessments have to go up;  way up, at the same time these owners are thinking about skipping lunch every day in order to save some money.

So much of this was avoidable.  Is it me, or does it seem insane that Board members who know nothing about construction, get to determine the life expectancy of the building’s roofs, electrical systems, structure etc.?  Shouldn’t it have been clear that the people performing these studies should not only be qualified, but also not have a financial interest in its outcome of a reserve study? Yet, this is still allowable under Florida law.  I think a junior high school economics course could quickly come to the conclusion that this is a bad idea.

Wages are not rising, but everything else is or is about to.  The Florida Legislature needs to act and act quickly.  Tear off the Band Aid quickly, force associations and their owners to put money away for a rainy day or at least require a vote of 80% of all owners to waive the full funding a reserve account.  It’s the same percentage required to terminate a condominium.   Don’t allow the problem to simply get even worse.  Make the tough calls and let the market work itself out over the next few years.  But don’t let the insane system we have now stay in place.

If I’m an owner in a high rise condo that has no or little reserves and my building is 20 years old or older, I would sell and sell fast.  That is….if I can find a buyer dumb enough to buy into this disaste

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