The landscape for condominium home ownership is undergoing significant changes. Recent reports from Redfin indicate a stark contrast between the national trend of rising condo prices and the reality in Florida (https://fortune.com/2024/02/27/florida-condo-prices-dropping-insurance-hoa/). Condominium sales prices in Jacksonville have seen a nearly 7% decrease year over year, while Miami experienced an almost 3% decline. The culprit behind this trend? Soaring insurance and new legislative changes following the Champlain Towers South collapse.
Hurricane Ian in 2022 further exacerbated the insurance crisis by triggering a surge in flood insurance rates, adding to the financial burden on condo owners. Homeowners insurance in Florida escalating by about 40% year over year in 2023 and a staggering 102% over the past three years. Now, Florida's insurance costs are three times the national average. In addition, in response to Champlain Towers South, the state of Florida now mandates that all condos maintain "adequate reserve for replacements," imposed additional requirements regarding reserves for condominiums, which, while aimed at for long-term safety, has led to immediate rises in monthly condominium dues. The increased insurance and dues can make a debt-to-income ratio untenable for many potential buyers.
As such, is this downward trend in demand for condominiums going to continue, or is it just a blip on the radar? What should savvy boards do to ensure their associations are financially viable and attractive to buyers and their lenders? Our attorneys have been monitoring the trends and share the following insights:
"I started representing condominiums in the middle of the recession, so I’ve seen firsthand how detrimental it can be to an association when many owners can no longer afford to live in their condos. Another wrinkle is that potential lenders for buyers will be looking closer at the financial condition of the condominium itself before approving loans. Unless things change, it’s easy to envision the delinquency rate for condominium associations (and townhome associations) rising dramatically in the coming years. Knowing how to utilize liens and foreclosures timely and effectively will be instrumental."
Attorney Don H. Nguyen
“As a condominium association attorney and real estate agent, I have seen firsthand the increased condominium fees affecting potential buyers and owners alike. Buyers are reluctant to purchase a condominium with the uncertainty of assessment amounts and owners are struggling to keep up with the monthly dues. Purchasing a condominium used to be a feasible goal for first time homebuyers, however with the increasing assessments, single-family homes have become more appealing. Increased prices to own along with a weakened market to buy could lead to a lot of financial woes for members and boards alike.”
Attorney Crystal Beloff
"Condominium associations across Florida are facing exceptional financial challenges due to the rise of insurance costs and required funding for structural repairs. However, there may be options for your community to overcome those challenges with proper financial and legal planning. A comprehensive legal review of the association’s governing documents along with proper budgeting can assist with getting the most out of your association. These unique challenges undoubtedly require a level of compassion for unit owners that are ultimately responsible for funding and our firm has guided clients to strike an effective balance between the two.”
Attorney Ryan Fong
Our office recognizes the trends leading to legal challenges facing Florida's condominium market. The potential surge in liens and foreclosures requires a strategic and vigilant approach. By understanding the market forces that affect our industry, addressing financial obligations, and safeguarding the interests of our clients, we aim to proactively represent our clients with precision and expertise.
