Towering Uncertainty

Never miss a Feature: Subscribe to Florida Trend

Sonja Przulj loves her two-bedroom, two-bath condominium in Miami, located on the 21st floor of the 27-story Palm Bay Yacht Club, with spectacular views of Biscayne Bay, downtown Miami and South Beach. She paid $285,000 for the corner unit in September 2021 after renting in the building for years.

Przulj, 39, purchased at the height of the pandemic, when she was working nonstop as a nurse. “It seemed like it was meant to be,” she says. “But the thrill was very short-lived.”

That’s because less than a year later, Przulj, who lives in the condo with her husband, Jean Pablo Vialle, and their five-year-old son, was hit with a $145,000 special assessment by the condo association to pay for repairs in the aging building.

“It’s an earth-shattering number,” she says. And one she can’t afford to pay.

Built in 1982 at the height of South Florida’s high-rise condo building boom, the Palm Bay Yacht Club has not worn the years well, according to inspection reports from engineers hired by the condo management company. Facing its 40-year inspection, the tower’s list of issues is reported to include cracks, crumbling concrete and separation of the stucco layers. Needed repairs include remediation or replacement of expansion joints, waterproofing and drainage, and window repairs, records show. The condo also needs its tennis court replaced and its pool and jacuzzi repaired. The total cost assessed to residents of the 235-unit building is estimated at $33 million.

Przulj says that she’ll have to pay the special assessment back in four quarterly payments over a year unless the condo association is able to obtain a bank loan to help finance the necessary repairs and improvement projects. In that case, it would be payable over 20 years, she says. Last year, she became one of a group of 10 Palm Bay Yacht Club residents who filed suit against the condo association, the property management firm and a number of contractors alleging that the state of the building is being exaggerated, that they are being overcharged and that the association mismanaged past upkeep and financial responsibility over the building. “There is no way myself, or probably half the building, can come up with that money,” Przulj says. “I risked it all by buying this unit, and I have nowhere to go with my family.”

Attorneys for those being sued have called the allegations false, saying the repairs are mandated by law and the condition of the tower is dire. It has been the subject of numerous hearings in front of Miami-Dade County’s unsafe structures committee. “It defies logic to allege that the association and board of directors are deliberately acting in bad faith to put themselves in more debt than is necessary,” defense attorneys wrote in one filing. The case is in mediation, but in April, Judge Thomas J. Rebull ruled that it would not be in the public interest “in light of the Surfside Condominium collapse” to further delay concrete restoration on the tower, including installing shoring to the condominium’s parking garage.

The dispute pitting residents against each other is a scenario likely to be playing out again in Florida as state laws go into effect requiring older condos three stories and taller to be reinspected at earlier intervals and for condo associations to be more diligent in funding reserves for on-going maintenance and repairs. The June 2021 collapse of the 12-story Champlain Towers South, killing 98 people in Surfside, laid bare safety concerns about Florida’s older condo towers — the earliest ones now reaching past 50 years of age. Scores of other high-rises were built 40 years ago during a building boom in South Florida, an era when insufficient building codes and lax inspections were the subject of repeated grand jury investigations.

Before the collapse in Surfside, condo buildings in Florida weren’t required to be inspected by a licensed architect or engineer after being occupied, with the exception of those in Miami-Dade and Broward counties which had enacted their own, stricter local ordinances. Champlain Towers South’s 40-year inspection, as required under Miami-Dade’s recertification program, was underway but repairs had not been made at the time it collapsed. When state lawmakers first responded to the disaster nearly a year later, the state began requiring all condominium buildings of at least three stories or higher to undergo a “milestone inspection” after 30 years, and every 25 years if they were within three miles of a coastline.

The buildings then would be required to be inspected at 10-year intervals going forward. Condo associations also were required to ensure they had sufficient cash on hand for future structural repairs and could no longer waive or underfund reserves. The 2022 law caused such upheaval that this spring lawmakers and the governor pushed the requirement for coastal buildings back to 30 and are leaving it to local governments to decide if a 25-year inspection is “justified by local environmental conditions” including proximity to seawater.

The scale of who might be affected by the reinspections and ensuing costs is massive, according to legal and engineering experts. When the Florida Bar produced its report on the Surfside collapse, it cited figures from the Florida Department of Business and Professional Regulation saying there are more than 912,000 condominium units (out of some 1.5 million total units) in Florida at least 30 years old. Calculated using U.S. Census formulas, the state pegs the number of people living in condo units 30 years and older at upwards of 2 million.

But the uncertainty faced by those now living in older buildings with expensive repairs remains as some associations come to realize past boards never funded the reserves needed to maintain aging buildings, and now the state gives them no option. “I’m very proud of how quickly my boards have leapt into action,” says Donna DiMaggio Berger, a partner at Becker & Poliakoff in Fort Lauderdale who is board certified in condominium and planned development law. “But some are now being threatened with recall by unit owners who want to throw a monkey wrench into the maintenance and repair process because they don’t want to pay assessments. That is the type of craziness going on now.”

With so many unit owners unable to pay special assessments, some boards are seeking loans to help cover the cost of repairs — loans that are collateralized by the association’s receivables from residents’ payments on assessments, says Telese Zuberer, an attorney with Icard Merrill in Sarasota who represents homeowner and condo associations. Others expect the payments to be made on relatively short payment schedules, like Przulj could be required to do.

Unit owners opting to sell when facing a special assessment may find it difficult or impossible to find a buyer willing to assume that obligation. But some developers are capitalizing on the situation by attempting to buy out entire towers.

Edgardo Defortuna, president and CEO of Fortune International Group in Miami, is among a group of South Florida developers who target older condo towers — particularly those in prime locations or on the waterfront — for redevelopment, buying out entire towers of homeowners, dissolving the condo association and tearing the towers down. Defortuna says that due to the scarcity of land in South Florida, the projects make sense, especially when condo owners are paid well above market rates to vacate the units. “You can make an offer for all the units in the building that is above the market price of each individual unit,” he says. “Then you can terminate the condominium, knock it down and build a new tower.”

Defortuna says Fortune has completed three condominium terminations to date and has plans to acquire additional properties. Fortune typically offers owners up to twice the market value of their units, he says, and the firm’s brokerage arm helps them find a new place to live.

“If you spend $100,000 redecorating your unit and change your bathrooms and kitchen, a buyer might be willing to pay $100,000 extra because this unit is better than the rest,” he says. “But if you’re special assessed for $100,000 to pay for fixing columns and filling cracks to make sure the building won’t fall down, a buyer coming in will see you have the same old unit as before and won’t pay any more for it. You’re not adding any value to your unit other than making the building sound structurally.”

While much of the initial impact of the post-Surfside reforms is being felt in South Florida, where most of the state’s earliest condo towers were built, the ramifications of the new inspection and reserve laws eventually will be felt statewide. Bilzin Sumberg Partner Joseph Hernandez, who represents developers in condo terminations and redevelopment, says there’s no way to sugarcoat that many condo-dwelling Floridians are living in homes not built to last.

“That’s a cold hard reality,” Hernandez says. “They all have a variety of functional obsolescence issues — poor engineering (or) they are starting to degrade because they are by the water. The value of the units continues to decline. It doesn’t take a genius to figure out when you have increasing costs and a decreasing value of the unit. … There may be some special cases out there where the building over their history, they may have made some changes and stayed ahead of it. But the majority of them have reached the point where it is only getting worse.”

Berger, the condominium association attorney, says the new law is the final cap on an era where a coastal residence is attainable for most buyers. “Developers marketed condominiums and cooperatives as your little slice of affordable paradise where you could live on the ocean and enjoy those views,” Berger says. “But it seems like only the very wealthy are going to be able to afford to live in older coastal buildings. Still, if Florida ends up with the safest housing stock in the country, that is a very positive thing.”

The prospect of a $145,000 special assessment and the ensuing court fight have soured Palm Bay Yacht Club resident Przulj on condo life. “I love this building, and everyone who comes here sees how special it is,” she says. “But living in a condo feels like you’re never in control. I don’t know if this was such a smart move.”

Florida’s new condo inspection law

• Applies to buildings at least three stories tall.
• For buildings less than 30 years old, the milestone inspection must be completed by Dec. 31 of the year in which the building reaches 30 years of age and every 10 years thereafter.
• Buildings for which a certificate of occupancy was issued on or before July 1, 1992, must have their initial milestone inspection by Dec. 31, 2024.
• If justified by local environmental conditions, including proximity to seawater, local enforcement agencies responsible for enforcing the milestone inspection requirements can opt to require a 25-year inspection.

No Easy Out

While some condo tower boards are seeking loans to help cover the costs of needed repairs, it’s not a slam-dunk solution for all. Governing documents sometimes don’t give condo boards the authority to take out a loan. “In other cases, the windstorm deductible the association has chosen (to make the coverage affordable) is too high to make the association a feasible borrower for most banks,” points out Donna DiMaggio Berger, a partner at Becker & Poliakoff in Fort Lauderdale who specializes in condominium and planned development law. “It’s a perfect storm with the state doing little currently to sort it out.”

Tags: Miami-Dade, Southeast, Around Florida, Feature