Maria Tkachun and her spouse spent $490,000 in 2022 on a seventh-floor condo with a balcony and patio that provided breathtaking views of Biscayne Bay in South Florida. They also spent an additional $100,000 on renovations, including installing Italian porcelain tiles and adding a marble countertop and island to their kitchen in the Cricket Club condominium tower.
However, two years later, they were hit with a six-figure special assessment. This charge, often levied on condo owners and homeowners in HOA communities, is typically used to fund property renovations or replenish underfunded reserves.
“This is just outrageous,” Tkachun expressed to The Wall Street Journal (WSJ).
South Florida Condo Market Crumbles as Owners Face Six-Figure Special Assessments
Following the tragic Surfside condo collapse in 2021, which resulted in 98 fatalities, Florida has mandated stricter safety standards and more frequent inspections. As a result, many condo associations are raising fees to build larger reserves for necessary repairs.
The Cricket Club’s condo board has proposed a nearly $30 million special assessment for repairs, including roof replacement and facade waterproofing, which would cost each unit owner over $134,000.
Some owners, like Ivan Rodriguez, who used his 401(k) to purchase a unit for $190,000 in 2019, cannot afford the additional fees and are opting to sell their condos. According to the WSJ, the inventory of condos for sale in South Florida has more than doubled since the first quarter of 2023, now exceeding 18,000 units due to rising insurance costs and repair fees for older buildings failing inspections.
According to Greg Main-Baillie, an executive managing director at Colliers Real Estate, “I think this is just the beginning,” the Wall Street Journal noted.
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Struggling to Sell Amidst Rising Fees
Despite the increase in available units, sellers are struggling to find buyers. Rodriguez initially listed his unit for $350,000 but had to reduce the price multiple times before finally selling it for $110,000 in April, a 42% loss from the purchase price.
Fort Myers real estate agent Claudia Springgay reported seeing 1,000 more condos on the market this May compared to last year, attributing this to higher association fees that have increased by an average of 20% to 25%.
“People have become very nervous about the fact they’re buying a condo and getting hit with another assessment,” said Sue Christiano, another Fort Myers agent.
How to Avoid Large Special Assessments
Many older condo buildings in Florida have waived reserve funding for years, leading to sudden fee increases for owners due to new laws. Tkachun noted the first red flag when banks required a 25% down payment for a mortgage due to the building’s lack of reserves.
Before purchasing a property, it’s crucial to assess whether your HOA’s reserve fund is sufficient to cover repairs and unexpected expenses. If you receive a special assessment, you can try to file a complaint with your board, especially if you have the support of other homeowners and can prove the assessment is excessive or not funding a necessary project.
At the Cricket Club, special assessments have created tension between owners who can afford the costs and those who cannot, forcing some to sell. Residents are gathering documentation to potentially prove the fees should be lower.