Penthouse Delray undergoes balcony work, a common sight as condos face deadlines for inspections and repairs. Tim Stepien/The Coastal Star
Owners pay soaring prices for repairs, insurance, reserves as new demands hit coast ‘like a tsunami’
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By Rich Pollack
It was a storm that no one living in a beachside condo could have seen coming.
As shock waves from the June 2021 collapse of the Champlain Towers South in Miami-Dade County reverberated northward, condo owners up and down the coast became unwitting victims of the financial aftermath.
Insurance companies, fearing more billion-dollar losses, raised premiums on condos that in some cases would eat up close to half of a complex’s operating budget. State regulators and some local governments, hoping to stave off another catastrophe, implemented strict structural standards and revived a once-tempered requirement that buildings have fully funded reserves.
Now, with additional premium hikes on the horizon and with deadlines for often multimillion-dollar structural remediations and reserve studies closing in, condo boards along the southern coast of Palm Beach County are finding themselves forced to require special assessments and raise monthly or quarterly maintenance fees to levels that are driving longtime unit owners to consider fleeing their homes.
“People are starting to have to decide whether to fill their prescriptions or pay their HOA fees,” says Rob Marzigliano, president of Seagate of Highland in Highland Beach, where a small exodus of unit owners has already begun. “The people on fixed incomes are struggling.”
At the 316-unit Seagate, where four buildings planted on the west side of State Road A1A have stood for more than 50 years, the monthly maintenance fee jumped from $880 last year to just under $1,000. Added to that is a $60,000 assessment to cover repairs identified during a state-mandated inspection.
“We’re getting hit with a lot of repairs in order to make our condo safe,” said Marzigliano, who sees more increases coming.
At Seagate, where about a dozen units are on the market, the cost of those repairs is spread out over all the 316 unit owners, helping to minimize the impact. In some of the
smaller buildings with fewer than 50 units, assessments are coming in at more than $200,000 per unit.
While some are struggling to meet the suddenly high cost of condo living, many others on the coast can afford to foot the bills, even if they’d prefer not to.
Still, the cumulative impact of having to deal with what some call a triple whammy is leaving many wondering how condos will deal with a huge impact all at once.
“We understand insurance increases, we understand the importance of recertification and we understand the need for reserves, but everything is coming at us all at one time, like a tsunami,” says Emily Gentile, president of the Beach Condo Association of Boca Raton, Highland Beach and Delray Beach. “People don’t understand the impact of this on those of us on the beach. It’s devastating.”
Gentile says one group that is feeling the impact a little harder than most is seniors.
“It’s hard when you’re almost 80 years old and you’re getting hit with all this stuff and there’s nothing you can do but move,” she said. “It’s overwhelming.”
Another challenge facing condo boards is the increasing number of requests for improved amenities and services coming from new and often younger residents. Those improvements can also drive an increase in assessments.
Marilyn Blitz says high quarterly fees forced her to sell at the Yacht and Racquet Club of Boca Raton. Tim Stepien/The Coastal Star
“There were more assessments than I have shoes — and I have lots of shoes,” said Marilyn Blitz, who in September sold her high-rise two-bedroom unit at the Yacht and Racquet
Club of Boca Raton and moved to a beachside rental apartment. “It just became price-prohibitive to stay there.”
Blitz says that just before she sold her condo, the quarterly condo fee came in at just over $7,700 and included a special assessment and a $2,000 special bill for reserve funds.
On top of that, Blitz said, are rising property taxes, which this year were about $5,400.
Selling the condo where she had lived for about 15 years was not an easy decision for Blitz, who says she misses some of her friends and the amenities she took advantage of.
“I wish I hadn’t had to leave, but I’m happy where I am,” she said. “I figured if I sold my condo and put whatever proceeds I had in the bank, it would give me the leverage to do the things I want to do.”
Gentile and others say that assistance from state or local governments in the form of low-interest loans would help ease the burden shouldered by condo boards and condo owners, but that does not appear to be happening anytime soon.
Scrambling for insurance
Skyrocketing property insurance premiums are a problem across the state for single-family homeowners as well as businesses. For condominium complexes, however, the challenges that come with finding affordable insurance — if they can find insurance at all — has been magnified.
The beachside Clarendon condominium in Highland Beach is one of dozens of condos that discovered their insurance company had dropped them, forcing the board to race to find coverage.
“We had to scramble,” said President John Shoemaker, adding that many of the companies they hoped would help had pulled out of the state. In the end, Clarendon was able to get coverage from Citizens Property Insurance Corp., Florida’s insurance company of last resort.
At Clarendon, insurance costs increased 56% with the premium now about $400,000 a year. A special assessment averaging about $7,000 per unit was implemented in order to pay the premium.
“It’s absolutely killing us and we’re looking at a 20% increase coming this year,” Shoemaker said.
Insurance accounts for about 42% of the Clarendon board’s overall operating budget, and Shoemaker believes that just about all condos up and down the coast are in the same boat, with insurance being between 40% and 70% of budgets.
That can lead to other problems, according to Shoemaker.
“When you have to spend so much on insurance, there’s only so much left for mandatory maintenance,” he said.
In many cases, spending money on preventive maintenance is just not possible.
Paying for years of neglect
For many condos that focused on regular maintenance as well as preventive maintenance, the costs of making mandatory structural repairs can be affordable.
Yet for other buildings where maintenance has been put off, the cost of having to do several now-required repairs — replacing a roof or air-conditioning system, for example — is causing pain in the pockets of residents.
“A lot of problems come from kicking the can down the road,” Shoemaker says.
He says that in many cases condo boards faced with having to do repairs had options to “repair, replace or ignore,” and too often ignoring the problem was the chosen path.
At Seagate, for example, Highland Beach town officials say that inspections revealed emergency generators were not properly functioning for years, leading to the condo board’s having to pay for temporary emergency generators until new ones can be installed.
Mandatory inspections required as part of the state recertification process have revealed widespread structural issues due to concrete deterioration. In some cases, cracks and other signs that concrete has weakened have been painted over or otherwise ignored.
“Because of the age of many buildings, maintenance should be done annually,” said Kevin DuBrey, director of project management for Hillman Engineering, one of many firms that conduct the mandatory milestone inspections required for recertification.
DuBrey says that most of the time when his team does an inspection it finds signs of corrosion, including chunks of concrete missing or cracks.
“It’s rare that we don’t see minor structural damage,” he said. “It’s not significant but it should be addressed right away.”
Without proper treatment, corrosion could spread and further weaken rebar, bringing a danger of large pieces of concrete falling from the building, he said.
DuBrey said that a lot of issues engineers see come as a result of boards not knowing how important it is to address issues.
“It’s not with bad intentions, it’s not with malice,” he said. “It’s often a lack of understanding of the repairs.”
While acknowledging the possible burden of state requirements that buildings three stories or higher and 25 years or older be inspected before the end of the year — unless municipalities set earlier deadlines — some see a silver lining.
Shoemaker and others say recertification is a positive because it prevents condos from delaying needed work and it can take pressure off condo boards.
“Certification is good,” Shoemaker said. “It tells you just how far everything was left in a state of disrepair.”
In many instances in the past, condo boards would suggest repairs but could not get a majority of unit owners to approve moving forward.
Now with the state mandate, the decision on whether to make repairs that routinely cost millions of dollars no longer falls on the condo board.
Making reserves mandatory
Until recent changes in the law, condominium boards could waive any requirement to have reserve funds available if the majority of unit owners agreed. That changed after the Champlain Towers collapse; now condo boards must ensure reserves are available to cover the cost of major structural projects and of items with a value of more than $10,000.
For buildings that have been setting aside money for major repairs or renovations, the impact of the new law could be manageable. For those that haven’t, the new law will mean going back to residents once again, asking for more money.
“It’s going to be a financial burden people don’t yet understand,” Shoemaker said.
Most condos probably will have to ask for additional funds from residents, even those that set aside reserves but have had to use some of them for repairs to meet recertification requirements.
“It’s rare that there are associations that have fully funded reserves,” said condo law attorney Elaine Gatsos.
Under the new law, condos are required to complete a Structural Integrity Reserve Study by the end of this year conducted by an engineer, architect or other professional certified to do a state-required inspection.
That study mandates an evaluation of roofs, major structural items, electrical systems and just about anything else with a replacement cost of over $10,000 to determine the life expectancy of that item and the price of replacing it.
The study, which must be done every 10 years, also must provide a reserve funding schedule with a recommended amount that needs to be set aside each year so that the full amount needed to replace the item will be available when it reaches the end of its useful life.
If a condo’s internal wiring system, for example, will cost $100,000 to replace when its estimated useful life ends in 10 years, the board will be required to incorporate a portion of the cost into its annual budget each of those 10 years so it will have the full $100,000 when it comes time for a new system.
Gatsos, who has been representing condos for more than four decades, says that until the study is completed, uncertainty hangs over the heads of board members, who have a fiduciary responsibility to ensure funding is available.
“All the condo boards are shaking in their boots wondering what the reserve studies are going to come back with as far as the dollar amounts that they’re going to have to include in their budgets,” she said.
Impact on real estate
What does all this mean for the price of real estate?
Some say if too many residents sell or if an abundance of foreclosures occurs, it could result in values decreasing and could mean smaller buildings would have to sell to developers to be torn down and replaced with more luxurious condos.
Shoemaker is among those who say the improvements will make buildings more attractive to buyers.
“The property will look good and be certified as safe,” he said. “Prices will go up because the building will be better.”
Real estate agent Mark Hansen, who specializes in luxury condos, agrees that building improvements can enhance the value of units, especially east of the Intracoastal Waterway where demand remains high.
“When buyers know that things have been updated, it can certainly be helpful in maximizing value,” he said.
Hansen said that the beach area may have an advantage over condos in more western communities because demand for property remains strong.
“People want to live here,” he said. “It’s still a very desirable location.”
Possible solutions
Gentile, from the Beach Condo Association, is lobbying to have the state help condos and condo owners with low-interest loans. On her wish list are long-term low-interest loans for repairs, a low-interest loan fund for insurance and a revision of reserve requirements to make them manageable.
Gentile would also like to see regulations to ensure construction prices stay in check even during high demand.
State Rep. Peggy Gossett-Seidman, whose district includes Boca Raton and Highland Beach, is sympathetic but doesn’t see a solution anytime soon.
“The legislature has to address this but it’s not a quick fix,” she said. “Everyone wants a quick fix, but it’s just not quick-fixable because it has to be done correctly with everyone involved.”
She said she would work with some of her colleagues to discuss possible solutions and hopes the reserve issue can be brought back to the legislature next year.
Until fixes come from Tallahassee, condo boards and presidents will do their best to meet mandates while keeping unit owners’ challenges in mind.
Marzigliano at the Seagate condo says it’s been a challenge to get a good night’s sleep since he became president of the board — a full-time volunteer job — in April.
“I wake up worrying about how to restore Seagate and how to keep residents happy,” he said.
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