Miami's hot condo market just got very complicated

MIAMI – The tragic collapse of a residential tower spooked South Florida homebuyers and real estate investors alike into reassessing the risk of buying in the Miami-area condo market.

The market had been booming before Covid. Then it soared even higher as the work-from-anywhere culture took hold. But then in late June, scores of people were crushed to death in the Champlain Towers South collapse in Surfside.

Now, the market is focused on engineering inspection reports from older towers, which are required by the state to get recertified every 40 years. Insurers are also under scrutiny, as they hold the keys to new purchases in the market.

“No one in their right mind is going to buy a condo built before 2000 unless they have a safety certificate for the structure of the building, and it doesn’t exist today,” said Peter Zalewski, a South Florida condominium expert, consultant and analyst.

The Miami area has long been a tale of two condominium markets: those built before and after the year 2000, when strict new building codes born of damage from Hurricane Andrew went into effect. Now, after the tower disaster, the divide is suddenly even wider.

“Zoning was upgraded to the point where Miami Dade County zoning is probably some of the toughest in the state or the country, and as a result of that we were able to build again,” said Zalewski. “The thing is people weren’t aware of it prior to Champlain. Now, everybody knows about it, so there’ll be a great divide.”

While condo boards are rushing to send letters of assurance to owners, Zalewski said potential buyers cannot see inspection reports.

“No condo I’ve ever seen, and I’ve been here since 1993, has ever openly shared that information. There is a lack of transparency in the condo market here, by design, it is a sell-side market,” he said. “The condo association might put out the information right now. How did they find these engineers and why haven’t they shared them previously?”

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I don't think this should be looked at as a purely Florida situation. Anyone looking at buying a condo, anywhere, should exercise their due diligence. Three things to look at for older buildings are the most recent structural integrity survey and how old it is, the current level of cash reserves held by the HOA to cover not just routine but also major repair expenses, and the annual HOA fees. In particular if the seller is unable or unwilling to provide the actual structural inspection report, or if there has not been one within a reasonable period of time, then I'd walk away. In Florida condo associations are not typically required to provide that to prospective buyers and in the past have rarely done so. I don't think that is going to fly anymore.