Imagine being a condominium property owner, humming along paying off the mortgage and then getting a letter from your homeowners association (HOA) informing you of a six-figure assessment. Now imagine you don’t have the money, but according to HOA rules, failure to pay the assessment means you will lose your unit to foreclosure. However, selling the device will be virtually impossible once you reveal the rating to potential buyers. What are you doing?
This is the poison pill facing an increasing number of condominium owners in Florida. The insurance crisis has received the most attention as the ravages of extreme weather make their presence felt in the Sunshine State with increasing force and frequency. However, a particularly thorny offshoot of the insurance crisis is leaving many Florida condo owners with an impossible choice.
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Due to higher insurance premiums, many Florida condo owners are already facing higher HOA fees. This comes at a time when the insurance that owners carry for their own units is becoming increasingly expensive. Seventy-nine-year-old Howard Konetz owns a condominium in Aventura, Florida and experiences this nightmare. In a recent interview with Jeffrey Weinsier, an investigative journalist for Local 10 News, Konetz said his apartment costs have increased from $1,500 to $3,000.
Then he was hit with a $224,000 assessment. Condominium owners share ownership of the common areas in their community and are therefore subject to assessments, which constitute their share of the cost of repairing the common areas. Florida condo owners are affected by these sky-high assessments for several reasons. Many insurers require extensive repairs or upgrades to common areas as a condition of renewing the community’s HOA policy.
Another reason for the high ratings can be traced back to the tragic collapse of the Champlain Towers in Surfside. One of the main causes of the collapse was that important maintenance was not done for years because successive homeowners’ association boards could not reach a consensus on costs or timing. After decades, the problems became so great that the building collapsed.
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As a result, the Florida Legislature passed a law in 2021 requiring HOAs to increase their reserve funds and implement a more frequent inspection regimen in all Florida condominiums. These inspections by municipal authorities and insurance company representatives have led to a laundry list of issues that need to be corrected, especially in Florida’s older condominium communities.
Unfortunately, many condominium owners in older communities are not in a financial position to pay the resulting assessments. That’s because many of them are older and have fixed incomes. Many of the younger owners chose to purchase older condo communities, mainly because they were older and cheaper than the newer communities.
It is also important to note that ratings may vary depending on unit size. Larger units may have additional parking, storage space, or a greater percentage of ownership in the common areas of the condominium. That means they are subject to even tougher assessments. Local 10 News reports that some property owners in the Mediterranean village community of Konetz have been hit with assessments of up to $400,000.
Plans for Mediterranean Village include elevator repairs, concrete restoration, roof improvements and even $700,000 for landscaping. Konetz and his co-owners cannot pass on the costs to potential buyers. Even if they could, no sensible buyer would pay top dollar for a piece of equipment that carries a six-figure appraisal. They want at least an equivalent discount on the purchase price. That could turn a lot of sellers upside down.
Konetz has put his condominium on the market, which is still on the market after several price drops. An increasing number of condos for sale are showing six-figure appraisal fees, and buyers are staying away. Meanwhile, Konetz is unsure about what the future holds. When Local 10’s Jeffrey Weinsier asked him what he planned to do, Konetz said just one word: “Pray.”
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This article The Poison Pill Facing Florida Condo Owners originally appeared on Benzinga.com
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