THE HOUSING NUMBERS JUST DON’T ADD UP
By
Eric Glazer, Esq.
Published May 16, 2022
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 disaster.
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About
HOA & Condo Blog
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Eric Glazer graduated
from the University of Miami School of Law in 1992 after
receiving a B.A. from NYU. He has practiced community
association law for three decades and is the owner of
Glazer and Sachs, P.A. a five attorney law firm with
offices in Fort Lauderdale and Orlando.
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Eric is Board Certified by The Florida Bar in
Condominium and Planned Development Law.
Since 2009, Eric has been the host of Condo Craze
and HOAs, a weekly one hour radio show that airs at 11:00 a.m.
each Sunday on 850 WFTL.
See:
www.condocrazeandhoas.com.
Eric is the first attorney in the State of
Florida that designed a course that certifies condominium and
HOA residents as eligible to serve on a Board of Directors and
has now certified more than 20,000 Floridians all across the
state. He is certified as a Circuit Court Mediator by The
Florida Supreme Court and has mediated dozens of disputes
between associations and unit owners. Eric also devotes
significant time to advancing legislation in the best interest
of Florida community association members.
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