Florida real estate bombshell could destroy a lot of wallets

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Last May, Florida Gov. Ron DeSantis passed legislation mandating emergency reserve funds for condominiums statewide after the tragic collapse of the 12-story Champlain Towers South in Surfside.

While lawmakers hope the condo law overhaul will protect residents from similar events, some market experts have warned that the mandatory reserves could destroy Floridians’ wallets.

“These costs, they get passed on to the consumer in one way or another,” Pinion Enterprises founder and CEO Joe Pinion said on “Mornings with Maria” Monday. “Here comes the budget buster: this stipulation [was] put in place by Gov. DeSantis to secure lives, but it’s going to end up bankrupting a lot of people that didn’t see this 50% hit coming.”

Florida’s Senate Bill SB 4-D includes requirements for preventative maintenance and construction inspections on buildings three stories or higher, and for condo associations to collect and maintain structural integrity reserve studies and funds.

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Associations are required to perform a reserve cost analysis every 10 years for repair costs that meet or exceed $10,000. Associations must then mail their structural integrity studies to condo owners, who will contribute to the reserve together through an association-approved payment plan.

Miami high-rise condo buildingsMiami high-rise condo buildings

Florida’s condominium law overhaul could “end up bankrupting a lot of people,” Pinion Equities founder and CEO Joe Pinion said on “Mornings with Maria” Monday, January 16, 2023.

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To fund a reserve pool of money, 50% or more of the total cost for a condo’s repairs must be maintained.

Pinion explained how this could financially hurt landlords and Airbnb hosts, who may now have to pay additional housing costs under the new law.

“You’re talking about people who have the Airbnb that they thought, ‘Oh, all these people with their Airbnb business, this would be great, I was going to rent this property or I’m going to own this property, and then the actual income is going to eclipse what I have to either pay for that monthly rent or that monthly mortgage,’” the CEO explained.

Macro Trends Advisors founding partner Mitch Roschelle also cautioned that the reserves law will “create a dichotomy” between high-rise condos and single-family homes in Florida.

“It’s going to make single-family homes potentially more desirable because you can control your own destiny,” Roschelle said. “The other thing that we’re seeing in Florida… after the Surfside catastrophe, people don’t want to be on condominium boards anymore because it’s a tremendous amount of liability.”

“You’re volunteering to give back to your community, basically, and you’re potentially liable if you decided not to repair the seawall when it was supposed to be repaired,” he continued. “So there’s going to be a lot of shakeups down in Florida.”

Champlain Towers was 40 years old and in need of major repairs when it collapsed on June 24, 2021. It’s led to officials looking at the need to ensure other aging structures are safe, as 98 people were killed in the tragedy.

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At the time, the Real Property, Probate and Trust Law Section of the Florida bar task force said 912,376 Florida condo units housing more than 2 million people are at least 30 years old, including more than 105,000 older than 50 years and nearly 328,000 built between 40 and 50 years ago.

Overall, Florida is reportedly home to more than 1.5 million condo units operated by 27,599 condo associations, an Associated Press report said.

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The Associated Press contributed to this report.