By: Joseph E. Seagle, Esq. President of PCS Title
November 3, 2021
We didn’t give away all of our candy for Halloween. We still have some treats for you today. Thanks for reading!
1010 words…5 mins. 3 secs.
1 Big Thing: Florida Bar’s RPPTL task force releases recommendations to avoid another condo catastrophes
When the Champlain Towers South Condominium tower collapsed this past summer, the Florida Bar’s Real Property Probate & Trust Law Section formed a task force to figure out what could be done to prevent such a tragedy from happening again.
As we wrote here last week in an article about Fannie Mae’s scrutinizing of condos for mortgages, Florida laws are pretty lax when it comes to high rise condominium reserves, inspections, and maintenance.
- Boards can easily waive reserves, meaning that the association will not collect extra funds with each monthly assessment to cover long-term funds needed to replace roofs, re-pave parking lots, waterproof decking, or repair structural damages caused by weather and age.
- Waiving reserves keeps monthly assessments artificially low, and ensures that Board members don’t feel the wrath of their neighbors who don’t want to pay high monthly assessments.
- But that may be changing if the task force’s recommendations find their way into the Florida Statutes. Among their recommendations:
- Every high-rise (over three stories) condo tower in Florida should go through a structural inspection within the next three years and be re-inspected every five years.
- Publish those reports to owners within 10 days of the report being given to the Board; and require that the same reports be provided to potential buyers (the Florida REALTORs supported this recommendation as well).
- Use the current “developer turnover” inspection report as a baseline for such reports to follow but add waterproofing to the list of the current 13 items that must be inspected.
- Condos with 100 units or more and annual revenues of at least $500,000 must have a website that is updated at least quarterly for owners where the reports and budgets must be posted.
- Raise the requirement from a 50% board vote to a 75% board vote to waive only up to 50% of the reserves (waiving all reserves would no longer be permitted at all) and allow owners to sue associations that fail to complete the inspections and other requirements.
- The Florida Legislature should stop diverting money from the trust fund supported by a $4 annual surcharge on every Florida condo unit, and instead of using those funds for general operating budget needs, use the funds to educate condominium owners, board members, and property managers.
State of Play: The task force met 19 times within 90 days and heard presentations from various experts and associations who are stakeholders in this issue. When Champlain Towers South collapsed, the owners and board were fretting over how to pay for at least $15 million in emergency repairs that would cost each owner a special assessment of up to $50,000.00. Miami-Dade, where the towers were located, had a 40-year re-inspection requirement – the only one of its kind in Florida. Since then, other South Florida counties and municipalities have created a patchwork quilt of regulations and requirements, trying to avoid a similar tragedy from happening again.
Bottom line: Let’s hope the Florida Legislature takes up the Task Force’s recommendations and brings consistency to regulations across the state so the 98 deaths in Surfside aren’t in vain.
2: Zillow Offers misses the mark
Zillow, in a clause in their third quarter report, announced they will cut their losses and get out of the home-flipping business per CNBC.
State of Play: Wall Street doesn’t like unpredictability, and nothing is more unpredictable than local housing values. We had planned to write about the fact that studies had shown that Zillow, in most markets, had sold up to two-thirds of their purchased homes for less than they paid for them. You don’t make up for those kinds of losses with volume. So we’re not surprised that they are getting out of the business after realizing that their artificial intelligence technology can’t solve the riddle of local home values.
- Zillow’s “Offer” platform will close, cutting 25% of Zillow’s overall workforce, many of them acquisition and sales associates, title insurance and escrow specialists, and others who typically work remotely to purchase and sell homes for the company.
- Their stock dropped 10% on the news in regular trading, and another 10% in after-hours trading.
- The “Offer” portion of Zillow had lost $422 million in the third quarter alone, pulling the whole company down with it.
- The company still has over 7,000 homes that it will dispose of by the end of the year … probably to other institutional purchers … at a loss.
Bottom line: “Real estate is local” is a maxim that still rings true. When the big boy from out of town comes in and starts buying everything in sight, they’re bound to fail.
The take-away: Traditionally, the failure of one company in a business sector will pull down their competitors. It will be interesting to see how Opendoor, Offerpad, and other hedge fund institutional home flippers weather this competitor’s failure.
3: Other news we’re watching this week
- The future of real estate transactions on the Block Chain: “Blockchain platforms associated with the real estate sector provide an answer in terms of speed and safety that can considerably reduce the risk of fraud. All stages of the real estate transaction are concerned by this innovative technology and its implications for simplifying the transmission of data and reducing the time between the signing of the preliminary sales agreement and the deed of sale before the notary.” – Forbes
- Billions in aid still available to struggling renters: Congress allocated $45 billion in aid for renters during the COVID-19 pandemic. Much of it is still out there for those who apply. – CNBC
- 3-D printed houses helping meet demand: “A major home builder is teaming with a Texas startup to create a community of 100 3-D printed homes near Austin, gearing up for what would be by far the biggest development of this type of housing in the U.S.” – Wall Street Journal
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