Can Special Assessment Loans Rescue Cash-Strapped Condos In Florida?
In this latest LinkedIn issue of the Miami Condo Market Intelligence Report?, we examine how bank loans for special assessments and capital improvements could alleviate the funding woes for condo associations.
LinkedIn Volume 2024, Issue 31 (Subscribe here)
This week’s Miami Condo Market Intelligence Report? newsletter on LinkedIn examines whether bank loans to condo communities may provide a solution for unit owners who are facing increasing financial pressure in the leadup to Florida’s 2025 Condo Association Financial Cliff.
In the aftermath of the June 24, 2021 collapse of the Champlain Towers South in the town of Surfside on the barrier island of Miami-Dade County, everyone from residents to building inspectors, politicians to bankers understand better than ever the importance of ensuring that no Florida condo building ever unintentionally collapses again.
Nearly 100 people died and a $1 billion settlement was reached with the families of the victims.
A federal investigation is currently underway but the preliminary reports suggest a flawed design coupled with a lack of upkeep by the condominium’s association contributed to the disaster.
The Florida Legislature has taken a number of steps - prompted by insurance companies threatening to withdraw coverage in the state - to ensure that nothing like this ever happens again.
Up until now, the state’s measures were being implemented slowly but that all changes in 2025 when many of the measures take effect.
Beginning in January, condo associations in Florida are required to start collecting money from increasingly cash-strapped unit owners to place into reserve accounts that will be used exclusively to fix, maintain and improve the structural integrity of residential buildings that are at least three-stories tall.
People are dubbing this moment as the 2025 Condo Association Financial Cliff as it is expected to result in significantly higher costs for unit owners. News reports are already chronicling condo owners selling their units at deep discounts ahead of 2025.
Added to this, the property management firm FirstService Residential released the “2024 High-Rise Edition” of the “Benchmark: The Guide To Residential Association Operating Costs And Budgets” report.
In reviewing the FirstService Residential report, we found that Miami-Dade County highrise condo towers are paying monthly maintenance fees of far more than $1 per square foot on average.
As expensive as that sounds, the report spells out that only a small percentage of the monthly maintenance fees today are earmarked for the soon-to-be mandatory reserves.
This data point is leading some industry watchers to predict that maintenance fees will likely surge for condo associations that are currently working to finalize their 2025 operating budgets.
One way condo associations can lessen the monthly burden of special assessments - which reportedly can range in total from a few thousand dollars to more than $100,000 - is by obtaining a loan, thereby capping maintenance fee increases for owners on fixed incomes or those unable to pay upfront.
Financial institutions such as U.S. Century Bank in Miami are willing to finance the necessary repairs over a period of time that can range from a few years to as long as 12 years in certain circumstances, according to a new report.
Richard Alfonso, the Director of Specialty Products at U.S. Century Bank, said the interest rates on special assessment loans are typically on par with the rates being charged for mortgages on residential properties.
For special assessment loans, banks usually enter into agreements with the respective condo associations, not individual unit owners.
The loans are secured by an association’s right to lien units in the future, if necessary, in order for the banks to be repaid.
It is against this backdrop, we have launched a new podcast series with one-on-one interviews with decision-makers, such as Alfonso, to explore various aspects of the 2025 Condo Association Financial Cliff.
Our first story this week focuses on a one-hour podcast with U.S. Century Bank’s Alfonso, who discusses special assessment loans for Florida condo associations.
In the second story, we provide an overview of a Sept. 18, 2024, Miami Herald panel discussion entitled “Priced Out Of Paradise” in which I will be a panelist.
For the third story, we examine the key points of the September 2024 Monthly Meeting of the Miami Condo Market Investing Club?.
For the fourth story, we provide a series of charts analyzing condo association maintenance fees in Miami compared to other North American markets.
For the fifth story, we are asking readers - who are interested in appearing on a future podcast - to share their thoughts about Florida’s Condo Association Financial Cliff.
It is a lot of information but we are confident our reports will assist you to better understand current market conditions in South Florida.
It is worth noting that we are sharing a portion of our research for free with subscribers to our newsletter and readers of CondoVultures.com.
If you want access to all of our published information and charts, we would encourage you to join the newly launched Miami Condo Market Investing Club?.
The objective of the Club is to create a community that shares realtime, actionable information on the latest real estate trends, opportunities and service providers in South Florida.
The Club is ideally suited for Do-It-Yourself (DIY) condo buyers who can rely on our latest statistics, expert opinions and access to consulting services.
Additionally, we encourage you to listen or view our podcast wherever you get podcasts. The podcast is available on Apple, Spotify and/or YouTube.
As a reminder, we are always available for consulting, expert witness work and buyside brokerage services just as we have been since 2006.
If you are seeking information on condo resales in South Florida, please visit CondoVulturesRealty.com or call the office at 305.865.5859.
— Peter Zalewski, Founder of the Miami Condo Market Investing Club?
Story 1
Should Florida Condo Associations Finance Special Assessments?
Lender Richard Alfonso of U.S. Century Bank explains how condo associations can finance special assessments and capital improvements in order to comply with the newly revised Florida Condo Law.
Story 2
Expert Peter Zalewski Joins Miami Herald Panel To Discuss Miami-Dade's Condo Crisis
The 90-minute discussion entitled "Priced Out Of Paradise" features Miami-Dade Mayor Daniella Levine Cava, Florida Rep. Vicki Lopez and FIU Associate Director Ned Murray.
Story 3
Watch: Expert Peter Zalewski Analyzes Miami Condo Maintenance Fees
This is an an overview report and video from the September 2024 Monthly Meeting of the Miami Condo Market Investing Club?.
Story 4
Miami Condo Maintenance Fees By The Number From September Meeting
These are the supplemental condo association maintenance fee charts for the September Monthly Meeting of the Miami Condo Market Investing Club?.
Story 5
Are South Florida Condos On The Brink? Share Your Story On A Future Podcast
We launched a new podcast series this week in which we interview decision-makers about the repercussions of Florida's looming 2025 Condo Association Financial Cliff. We want to hear your story.
This information is believed to be accurate and complete but cannot be guaranteed or warranted.
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