Q&A – How Much Florida’s New Condo Laws will Save You

For impacted condo associations, the range in potential savings is realistically between $1,750 to $4,900 per unit in year 1 with residual savings of $750-$3,700 per unit in subsequent years.

Episode Transcript

Speaker 1 (00:00):
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(00:20):
the Brian mud Show. Yeah, Today's Q and A how
much Florida's new condo law will save you? This is
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(01:06):
I listen to your show most mornings You're forgiven for
the most thing we can do, but that means there's
room for improvement. I'm kidding, kidding. Appreciate you being there,
Gentleman said, today's show caught my attention. The Q and A.
Can you tell me where you got the estimates for
unit owner savings? I tried searching on the internet and

(01:26):
could not find anything. Are those estimates your own figures?
Thank you? Give bet so Yes. In yesterday's Q and A,
which addressed the two new Florida laws aimed primarily and
addressing Florida's condo affordability crisis brought about in part due
to new laws past following the collapse of Champlaining Towers,

(01:48):
Health and Surfside, I offered up this following a detailed
detailed a breakdown of the laws for impacted condo associations.
The range in potential saving is realistically between seventeen hundred
and fifty dollars to forty nine hundred dollars per unit
in year one, with residual savings of seven hundred and

(02:11):
fifty to thirty seven hundred dollars per unit in subsequent years.
This will figure to be substantive savings pre owners and
older condo buildings while providing a number of reforms for
all condo owners, regardless of the age of the building. Okay,
so that was my summation of savings yesterday. Now an
answer to today's question. The answer is that, yes, this is

(02:35):
my estimate, and I had actually considered breaking out the
methodology yesterday because I understand that when I just say
that after explaining what the new laws are, might wonder
what it really does mean to you and how I
got from here to there. I realized in the story
yesterday it would just be way too much detail on
top of what was already a really heavy info breakout.

(03:00):
But since you asked, and I also had other inquiries
as well, I'm more than happy to go ahead and
break this out a bit more for you. The key
in this conversation about potential savings is what I mentioned
as impacted associations. If you're in a newer condo building,
many of the new rules and RAG supply and from

(03:21):
a cost savings perspective, may be helpful in time. However,
it's largely ineffectual financially right now, aside from the potential
for even some newer buildings to not have to hold
as much in reserves over the short term. But anyway
you realize a demarcation, I mean you get into milestone

(03:42):
inspections every ten years, no matter the age of the building,
just every ten years that hits. But then really those
thirty and older because immediately every building had to have inspections,
and well, the impact of that had a substantial effect.
So that is the point of primary impact. So commonly,

(04:03):
once those inspections have happened, there have been significant maintenance
repairs that have been ordered as well, and it's not
only led to high special assessments, but also much higher
overall assessments to account for the rising reserves that have
been needed as well. Additionally, findings can impact insurance options, eligibility,
and costs. So here's the next thing. The cost savings

(04:27):
apply to most local condo owners. Eighty four percent of
Palm Beach County's condo buildings are thirty years old or
older eighty four percent. And notably, the average sales price
for a condo and Palm Beach County that is thirty
years old or older is fifteen percent lower than in
newer buildings, and it's largely due to these factors. So

(04:48):
it has had an enormous impact on resale prices. That's
well in excess of even my savings estimates. So you
can also just kind of file that away in terms
of what is the cost of this to me? But
about those the major cost saving aspects of this legislation
are these extending the reserve study requirement for one year

(05:12):
and allowing for a two year pause and reserve fund
contributions to prioritize critical repairs. This is why the cost
savings is the largest upfront in year one, and then
increases the replacement costs of repairs required to be reserved
from the Structural Integrity Reserve Study or the year study

(05:34):
from ten thousand to twenty five thousand dollars. Okay, So
this provides residual savings through lower mandated reserve levels ongoing,
and then it provides additional funding options for associations to
ad flexibility. Now this allows, for example, associations to be
able to pay for inspections and some repairs through a

(05:56):
loan or a line of credit, which can mitigate the
need for special assessments. If reserves already cover you know
that those expenses, then you don't have to go ahead
and hit with an assessment. So those are the three
biggest upfront, but actually the biggest impact for many condo
associations is and will be the insurance impact. There's been

(06:19):
a cascading that cost effect with many with the mandated seers,
the structural integrity of reserve studies for buildings thirty years
in older, and also the milestone inspections for condo buildings
every ten years. The first piece of it is that
the inspections themselves, they're not cheap. They're pretty expensive, often
resulting in an expense into the hundreds of dollars per

(06:43):
unit for a building's inspection. By the way, my mean
calculation for what these have been running has been two
hundred and seventy five dollars per unit. So that's the
first piece. And then approximately eighty percent of inspections have
resulted and recommended maintenance and repairs, about a third of
which have been determined to be quote unquote majoral meaning

(07:05):
structural concerns. These have often resulted in concrete restoration projects,
roof replacement, post tension cable replacement for buildings that are
constructed with them. So for the forty seven percent or
so of buildings that have minor repairs needed, the average

(07:26):
cost per unit and the increase in dues to support
the reserves has been approximately thirty five hundred dollars. For
the average major finding, it's been approximately fifteen hundred dollars
fifteen hundred and fifteen thousand dollars per unit. And by
the way, you'll find local examples that have gone way
over one hundred thousand. And then there's the insurance piece. Often,

(07:50):
inspections have led to higher costs to maintain insurance coverage
or loss coverage if repairs aren't made right away. For
some associations, this has become the most expensive part of
the process. Entering this year, fewer than half of condo
associations of older buildings were in full compliance with the

(08:11):
inspections process, and this has contributed to many associations losing
access because the moment you're not in compliance, boom Citizens
is off the table, like you're done, so you lose
that and just give you an idea, And for associations
on Citizens that has been an average of twenty percent cheaper.
For condo association buildings that are three miles or more

(08:34):
away from the coastline than private market providers, it's been
commonly half the insurance costs, with examples of up to
three times the costs for buildings that are closed or
on the coastline to find an alternative provider. So the
estimate range that I provided where I said it's a
realistic range, is a blended number factoring in all of

(08:56):
those dynamics. Obviously, the new law doesn't make the inspections
go away, or potentially the needed repairs go away for
that matter, but it does provide anywhere from one to
two additional years first to come up with the funds
to pay for inspections and to build reserves, while also
permanently making the mandated reserve funds less burdensome and those

(09:20):
additional funding options as well. And in the meantime, as
I mentioned, that insurance piece is for many associations the
most expensive piece that helps from an eligibility perspective, because
with that extra time, no longer in non compliance. If
you're building isn't in compliance with the law right now,
you're back in compliance with the law, and so you

(09:43):
can retain your citizens coverage or whatever the other insurance
coverages that might be more affordable than the alternate options
that you can be forced into, otherwise