MIAMI — Big changes
are coming to Florida's condo market.
Developer Ian Bruce Eichner calls it "the most significant
impact on waterfront real estate that you've ever seen in
your professional lifetime."
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Driven by new regulations, developers are tearing down many older buildings on the waterfront in Miami and other cities in Florida and replacing them with luxury condominiums. |
To comply with the law, many associations
are significantly raising monthly fees. In addition, newly
required inspections can lead to shockingly high special
assessments, which not every condo owner can afford to pay.
"You may have those that are on a fixed income that are
retired and they may not be able to," says Miami attorney
Robert Pelier. "Some developers, either ethically or
unscrupulously, may seek to take advantage of that financial
landscape."
Developers sometimes adopt tactics aimed at pressuring
reluctant condo owners into selling. And even when condo
associations agree to a buyout, deals can go bad. Pelier
owns a condo in a building on a particularly desirable part
of Miami Beach, an area sometimes called "Millionaire's
Row." In Pelier's building, unit owners agreed to sell to a
developer two years ago. But since then, he says, the deal
has stalled, leaving residents in limbo. Contracts, he says,
have been "extended and re-extended and re-re-re-extended.
And you know, you can't have people trapped in a contract
forever."
Residents are suing to get the developer to follow through
on the deal.
Rising interest rates and steep construction costs have
slowed down some of the projects after contracts have been
signed. In other cases, owners are struggling with
developers who buy up other units in the building and, in
some cases, take control of the condo association board.
Mathew Zimmerman is a lawyer who represents a group of
residents in that situation in West Palm Beach. They filed a
lawsuit to block their condo's termination. Under the deal,
Zimmerman says they were being offered just $40,000 in cash
for their units — far less than what they're worth.
"During the hottest Florida real estate market where
everyone is moving into town from New York and other places,
go find a new place to live for $40,000," Zimmerman says.
"That would be impossible. Certainly not in that area."
Florida law requires that condo owners receive fair market
value for their properties. A judge ruled that it hadn't
happened in this case, but the developer is appealing.
For developers, the major challenge in targeting old
buildings is persuading a hundred or more owners of condo
units to sell. Eichner says it's not easy. "Because you've
got to be willing to sit in coffee shops and hold people's
hand. You've got to be willing to go find the grandchild to
help the grandparent relocate. Most of the people in the
development business, that's not what they do."
Eichner believes the current regulatory and real estate
market should make it a win-win for the developer and the
unit owner. Condo units in these aging beachfront buildings
typically sell for hundreds of thousands of dollars.
"However," Eichner says, "if you were to take the totality
of the building, all of the units, and tear the building
down, the land is worth a million dollars a unit."
That means unit owners can get a lot more for their condos
if everyone agrees to sell.
But even if the price is right, some retirees and other
longtime tenants might not be interested in a buyout. Under
Florida law, if just 5% of unit owners object, they can
block the sale. Eichner believes that provision of the law,
which protects condo owners, is killing too many deals. He's
hoping in upcoming legislative sessions, Florida lawmakers
will amend the regulations and make it easier for developers
to tear down and replace aging condominiums.