Unit owners at at
least two condo towers in Miami Beach are facing millions of
dollars in special assessments to pay for restoration and
renovation work, an issue affecting dozens of properties
across South Florida.
In the year since the deadly condo collapse in Surfside,
such assessments are adding to other mounting costs for
condo boards and unit owners, who are also grappling with
rising insurance rates, property taxes and pressure to
ensure that buildings are being maintained.
Most recently, Murano
at Portofino, a 37-story, 189-unit tower at 1000 South
Pointe Drive, and Murano Grande, a 40-story, 189-unit
building at 400 Alton Road, are beginning to tackle projects
that have been discussed for years, owners say. Both luxury
condo buildings were developed by the Related Group and
Thomas Kramer’s Portofino Group in the early 2000s.
Murano at Portofino is collecting funds from owners for the
first of a two-phase project, said unit owner and broker
Andres Asion. He recently posted a photo on social media of
the first payment he owed: $52,525.
The first phase is estimated to cost
close to $30 million. It calls for repair work to the
stucco, balconies, waterproofing, water intrusion and other
issues that buildings near the ocean commonly face.
The work also includes
non-essential upgrades like replacing luggage carts and
renovating the beach club, and does not include pool/pool
deck work, which would be in the second phase. Unit owners
have not yet received an official estimate for that phase –
a major concern for owners.
The initial roughly $30 million special assessment breaks
down to an average of $160,000 per owner, though their share
of the cost is based on the square footage of their units
and how many units they own. The building isn’t offering
financing, which means the unit owners have to figure out
how they will come up with the cash.
Banks can typically provide an association with a loan or a
line of credit they can draw from, said Jose “Joe”
Rodriguez, a real estate attorney and partner at Rennert
Vogel Mandler & Rodriguez. Rodriguez was part of the state
condo task force formed after the Surfside collapse that
made recommendations to the Florida Legislature.
The burden is on members of the condo board to hire
consultants and determine what work to prioritize, he said.
Boards will often throw in beautification work to get
everything done at once.
“There’s no doubt that any condominiums that have deferred
maintenance that’s been accumulating over time are going to
be faced with special assessments or economic obligations,”
Once work begins, contractors will often discover other
problems that need to be repaired, increasing the cost to
unit owners, said Alex Martin, vice president at KW Property
Management & Consulting. Plus, as the cost of construction
and materials continues to grow, Martin advises against
waiting any longer to begin projects.
“Five million dollars five years ago is now $9, $10
million,” he said.
He expects older buildings with owners who live on fixed
incomes will face the biggest challenge.
John Caprio, a board member who owners say has been leading
the effort at Murano at Portofino, declined to comment on
the planned project and referred The Real Deal to the
building’s management company, which did not immediately
respond to a request for comment.
At a town hall meeting last week for owners and residents of
Murano Grande, a representative from KWPMC presented a
proposal for a $7.4 million special assessment to pay for
paint, and stucco and pool restoration work. Owners would
make nine quarterly payments to cover the cost. The
proposal, in its early stages, breaks down to about $39,000
per unit on average, or average quarterly payments of about
$4,350 for a little over two years.
The meeting prompted many unit owners to criticize the
process in which the board presented the proposal. That’s
also become a more prevalent issue, as owners are split on
how to move forward with needed improvements and repairs,
especially after the collapse in Surfside last year.
“The collapse created a sense of anxiety and urgency,” said
Asion, who owns units at both Murano buildings. Champlain
Towers South in Surfside was embarking on a major
restoration project when the building unexpectedly collapsed
overnight in June of last year, killing 98 people. Leaks
from the pool deck were seeping into the garage, one of many
problems found at the building.
Hundreds of condo associations across the state will have to
raise their monthly dues or enact special assessments to
fully fund their reserves by the end of 2023, thanks to a
new state law passed in May. Previously, boards could vote
to waive reserve requirements.
“That wave is coming,” Martin of KWPMC said. “It’s going to
happen a lot with the older buildings, a lot of individuals
that have been waiving reserves.”
The new legislation also institutes 25-year inspections of
condo buildings three stories or taller within three miles
of the coast, or 30 years if farther.
Condos are typically more affordable than single-family
homes, but a large special assessment or a substantial
increase in monthly dues could make it unaffordable for
many. And any investor who rents out their units will likely
have to pass the cost onto their tenants.
“You’re going to have some flight,” said Dana Goldman, a
real estate attorney at Shutts & Bowen. “People are going to
be forced to sell if they cannot afford these assessments.”
Goldman called the first $30 million special assessment at
Murano at Portofino “mind-boggling.”
She and others expect a push for government assistance in
the form of low or zero interest loans to help unit owners
finance these projects.
“There’s going to be a lot of pain and hardship over the
next two years as this new legislation gets implemented, and
as the insurance market is still very very constricted,”
Goldman said. “How much more financial responsibility can a
lot of these owners bear?”