Why buying a cheap older condo in South Florida could be a costly mistake

Surfside collapse fallout

All Florida condo buildings built 30 years ago or older are required to undergo structural inspections by a qualified engineer or architect by December 31, due to the Condo Safety Act.

If the inspections find “substantial structural deterioration”, the law mandates that the issues be addressed within a year.

Even if less urgent decay is found, the law still compels condo buildings to make timely repairs.

Governor Ron DeSantis and the Florida Legislature unanimously passed the Condo Safety Act in response to the June 2021 Champlain Towers South disaster in Surfside. The collapse killed 98 people. The new safety regulations were implemented a year after the collapse. The cause of the disaster is still under investigation by the National Institute of Standards and Technology.

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Big bills and an exodus

When inspections find expensive repairs necessary for older buildings, condo owners associations require their residents to pick up the tab.

That’s because condo and homeowners associations don’t have enough money in their reserves to pay for the repairs themselves.

At the SurfSide Club South in Ormond Beach, property owners were billed over $100,000 each for repairs.

Homeowners in the Villas of Carillon townhome community of Feather Sound got a $60,000 special assessment for their units.

In Biscayne Bay’s Cricket Club condominium tower, Maria Tkachun and her husband, along with all the other owners, were charged $134,000 for repairs.

Rising insurance rates for older buildings due to weather-related disasters coupled with the coming deadline for repair inspections have led to higher listings, WSJ reported.

Condo listings surged in South Florida between July and September of 2023, almost entirely driven by units over 30 years old, ISGWorld’s analysis found.

DeSantis suggests solution

DeSantis is expected to call a special session of the Florida Legislature in the next three months to address the financial challenges condo owners face, NBC Miami reported.

"The path forward would be by the end of the year,” DeSantis said, adding later at a Miami Lakes roundtable that the state government should no-interest loans to help Florida condo owners pay for repair fees, Newsweek reported.

While no-interest loans from private companies often come with fine print, government programs are more straightforward. However, some private loans may include short repayment periods, similar to zero-interest loans offered by car dealerships to clear excess inventory.

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Pre-construction pitfalls

If you’re still interested in buying a condo in South Florida, and you’re hoping to avoid pricey repair assessments, a pre-construction condo may seem like a savvy move.

As of June 2024, there were 22,300 pre-construction condo units available in South Florida, according to ISGWorld.

However, realtor David Siddons warned of red flags to look out for when you’re buying a pre-construction home.

Before developers can start construction, they must sell 50% of the units to secure a construction loan. Without one, the timeline of when the homes will get completed remains unclear, Siddons explained.

Some developers will try to pass off the refinancing of an acquisition loan as a construction loan, but Siddon warns that they are not the same.

A typical pre-construction payment plan involves paying 10%-20% at contract signing and another 10%-20% at groundbreaking.

Siddon warned that some developers may claim to be starting groundbreaking without actually starting construction. Additionally, there is a difference in how existing condos and pre-construction condos are measured.

Developers’ floor plans for pre-construction condos tend to be 10-15% bigger than what’s recorded with the city, Siddons explained.

“Existing condos use architectural plans while new condos often use the square footage of the developer which therefore makes it seem the price per square footage is lower,” he said.