Before the Surfside condo collapse in 2021, private lenders that finance condominium association repairs might have closed only one or two of these deals a year. Today, that same lender may close one or two a month.

The shift reflects significant changes in how Florida condo associations approach structural inspections, reserves, repairs and the financial consequences of deferred maintenance.

Jack Miller, principal at Gelt Financial, has watched that shift play out from the lending side.

Gelt is a private lender that works with associations that cannot get financing through a bank, and Miller says the increase in demand traces directly to changes that followed Surfside — not only in how boards view structural risk, but in the regulatory requirements governing older condominium buildings.

WHAT CHANGED

Before Surfside, Miller said many condominium management companies and boards delayed dealing with major repair needs.

The collapse brought much greater attention to the responsibilities associated with maintaining aging buildings, while subsequent legislation created new inspection and reserve requirements for many Florida condominium associations.

Under Florida’s statewide milestone inspection program, residential condominium and cooperative buildings that are three habitable stories or more generally must undergo an initial milestone inspection when the building reaches 30 years of age, followed by inspections every 10 years.

Florida law also requires structural integrity reserve studies for qualifying condominium buildings, adding another financial planning consideration for associations responsible for aging properties.

For boards, the practical effect is that significant maintenance and structural needs can be harder to postpone indefinitely.

“You have to have adequate reserves, you can’t kick the can down the road with repairs. You have to do the repairs in a timely manner,” Miller said.

THE RESERVE GAP

Many associations do not have enough cash immediately available to cover major repair programs, Miller said. When required inspections identify significant work, boards may have to evaluate a combination of regular assessments, special assessments, available reserves, lines of credit or loans.

That can create a substantial financial challenge for buildings where owners have historically kept assessments low or where major capital projects have accumulated over time.

For individual unit owners, large assessments can also create financial pressure, particularly in older buildings with significant deferred maintenance.

For boards, the challenge becomes determining how to fund necessary work while managing the impact on residents and maintaining the long-term financial stability of the association.

Private financing has consequently become another option for associations that need to fund repairs but cannot obtain conventional bank financing or raise the entire amount through assessments on short notice.

TEMPORARY OR PERMANENT?

Miller does not see the increase in financing demand as a short-term wave that will disappear once buildings catch up with current requirements. In his view, it reflects a broader change in how condominium associations will have to approach long-term capital planning.

Florida remains at the center of that shift because of the state’s large inventory of older condominium buildings and the inspection and reserve requirements adopted following Surfside.

The financing challenge also extends beyond a single repair cycle. Roofs, structural components, waterproofing, electrical systems, plumbing and other major building systems eventually require significant capital investment.

Associations that historically relied on relatively low assessments may have to reconsider how they prepare for those expenses.

For boards, that puts greater emphasis on understanding future capital needs before a major repair becomes urgent.

Reserve studies and milestone inspections can give associations greater visibility into upcoming obligations, but identifying the work is only part of the equation. Boards still have to determine how those projects will be funded.

Associations that begin evaluating their options early generally have more flexibility to consider assessments, reserve contributions, conventional financing or private lending rather than trying to arrange capital after a major expense has already become unavoidable.

For lenders serving the condominium market, that shift is creating a more established financing need. For Florida condo boards, it is making capital planning an increasingly important part of managing an aging building.