The condominium industry in South Florida is reeling after the Surfside collapse on June 24.
Officials are struggling to address rapidly aging condos that have insufficient funding for repairs.
Industry experts say condo boards are lawyering up to protect themselves, and some buyers are pausing.
South Florida's condominium industry is already feeling shockwaves from the Surfside building collapse last month, as industry experts say condo boards are lawyering up and safety-minded buyers are pausing or backing away from deals.
Already, at least three condo buildings in Miami have been fully or partially evacuated after officials found concrete deterioration or other unsafe structural issues. Just days after the June 24 disaster at Champlain Tower South, which killed at least 95 people, Miami-Dade County Mayor Daniella Levine Cava ordered an audit of all the county's residential buildings that were at least five stories high and older than 40 years.
Miami-Dade's Department of Regulatory and Economic Resources told Insider it's reviewing 318 buildings that are currently in the 40-year recertification process, and will be inspecting 469 buildings currently in its "unsafe structures process."
Peggy Rolando, a Miami real estate attorney, told Insider the Surfside collapse has been "a real wake-up call" for the industry and local officials, all of whom are struggling to address the dueling problems of rapidly aging condos and insufficient funding for repairs.
"There's been a lot of soul-searching and self-evaluation that's going on now within the condominium industry," Rolando said. "This collapse has basically made us pull the Band-Aid off, fast, and look at are there legislative solutions that could help bring this focus onto better operations, better reserves than what we've got now?"
Under Florida law, condo associations are required to establish reserve funds to address repairs. But unit owners are allowed to meet each year and vote to waive or reduce those reserve funds - which is what happened with Champlain Tower South, according to the condo association's lawyer.
Alan Tannenbaum, a board-certified construction lawyer, told Insider more than 400 attendees recently showed up to an educational Zoom session held by his firm on the topic of aging condominiums. He said he viewed it as "an awakening" of what condo boards' responsibilities are to the unit owners.
"The [condo] boards are very concerned about their liability. They obviously want to protect their owners from anything catastrophic occurring," he said. "There's a heightened sense of awareness. They're learning a lot about what their requirements are, and paying more attention."
Aging condo buildings need repairs that many residents can't or won't pay for
Some have speculated that Florida legislators could move to address condo buildings with waning reserve funds, potentially by making it harder for unit owners to vote to defer payments year after year.
But Rolando said that could bring up a whole host of other problems, namely, that many condo owners can't afford to fund large reserves or pay special assessments that won't add any value to their property.
"What you see, especially in moderate condominiums, is sometimes there's people who have lived in the condo that they bought back 30 years ago," Rolando said. "They bought a really nice unit, they loved their buildings, but over the years the demographics have changed. The folks there can no longer afford to maintain the buildings in the way they were originally marked."
A whopping two-thirds of Miami's condo buildings are older than 30 years, The Wall Street Journal reported Wednesday.
Another way to address these aging buildings, Rolando said, is condo termination, meaning developers would buy out the aging condos, demolish them, then build entirely new structures. But that, too, is easier said than done: Under Florida law, even if more than 80% of the unit owners vote to terminate, a 5% minority can stop the whole process and block another termination proposal for two more years.
Buyers may pause now, but Miami is always in demand
Mark Zilbert, a Miami broker, told Insider that condo terminations could well become more likely in the future, especially with aging buildings residents deem aren't worth the cost of repairs.
He said his clients have recently been coming prepared and highly savvy, asking questions he's never fielded before in his career about building safety, structural integrity, and certifications.
Zilbert added that he's even had some - though not many - clients who have paused their hunt for a condo out of caution, saying the atmosphere "doesn't feel right."
But any pause in Miami's waterfront condo market is most likely temporary, Zilbert said. He expects demand to come roaring back within months.
"As long as we have a great climate, and as long as we have a cheaper cost of living, and above everything else, beautiful beachfront properties, there's going to be demand to be here," he said.
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