Imagine being a condo owner who is humming along paying the mortgage and then receives a letter from the homeowners association (HOA) informing you of a six-figure assessment. Now imagine you don’t have the money, but under HOA rules, not paying the assessment means losing your unit to foreclosure. However, selling the unit will be nearly impossible once you reveal the appraisal to potential buyers. What do you do for a living?
This is the poison pill facing an increasing number of condo owners in Florida. The insurance crisis has grabbed most of the attention as the ravages of extreme weather make their presence felt in the Sunshine State with increasing force and frequency. However, one particularly thorny consequence of the insurance crisis leaves many Florida condo owners with an impossible choice.
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Rising insurance premiums have already left many Florida condo owners facing higher homeowners association fees. This comes at a time when the insurance that homeowners have on their own units is becoming increasingly expensive. Howard Konetz, 79, owns a condominium in Aventura, Florida, and is living this nightmare. In a recent interview with Jeffrey Weinsier, an investigative reporter for Local 10 News, Konetz said his condo fees have increased from $1,500 to $3,000.
He then received an assessment of $224,000. Condominium owners share ownership of the common areas of their communities and are therefore subject to assessments, which represent their share of the costs of repairing the common areas. Florida condo owners are being hit by these sky-high assessments for several reasons. Many insurers require major repairs or improvements to common areas as a condition of renewing the community’s HOA policy.
Another cause of the high valuations dates back to the tragic collapse of the Champlain Towers in Surfside. One of the main causes of the collapse was that major maintenance went years without being performed because successive HOA boards could not reach a consensus on cost or timing. After several decades, the problems became so pronounced that they caused the building to collapse.
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As a result, the Florida legislature passed a law in 2021 requiring homeowners associations to increase their reserve funds and institute a more frequent inspection regime on all Florida condominiums. Those inspections by city officials and insurance company representatives have resulted in a long list of items that need to be corrected, especially in Florida’s older condo communities.
Unfortunately, many condo owners in older communities are not in a financial position to afford the resulting assessments. This is because many of them are older and have fixed incomes. Many of the younger homeowners chose to buy in older condo communities specifically because they were older and less expensive than newer communities.
It is also important to note that evaluations may vary depending on the size of the unit. Larger units may have additional parking, storage, or a greater percentage of ownership in the condo’s common areas. That means they are subject to even greater evaluations. Local 10 News reports that some homeowners in Konetz’s Mediterranean Village community have received 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 fellow owners are prevented from passing on the costs to potential buyers. Even if they could, no sensible buyer would pay top dollar for a unit with a six-figure valuation owed on it. At a minimum, they will want an equivalent discount on the purchase price. That could leave many sellers upside down.
Konetz has listed his condo, which is still on the market after several price drops. An increasing number of condo listings for sale are showing six-figure overdue assessments and buyers are staying away. Meanwhile, Konetz isn’t sure what the future holds. When Local 10’s Jeffrey Weinsier asked him what he planned to do, Konetz responded with 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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