Surfside collapse leaves costly legacy for Florida condo owners

Insurance on the 12-story building across from the Lake Worth Lagoon increased 82%, requiring a special meeting to hike the budget and jack up dues. It was a blow for the association, which had planned for just a 25% rate jump on top of a 25% increase the previous year.

"Everyone is shocked," said Mary McSwain, who bought her one-bedroom unit in the 51-year-old Portofino South Condominium in January. "I'm just getting near retirement and I thought this was going to be my dream place but I'm getting priced out."

McSwain, 67, said her dues are going from $914 a month to $1,347 – a monetary burden that means she will work more and longer instead of scaling back her job as an attorney.

While it's impossible to tease out exactly how much of the insurance increase was a reaction to the collapse in Surfside, Portofino property manager Robert Gardner said "of course" some of it is a consequence of the tragedy that killed 98 people in the early morning darkness of June 24, 2021.

Insurers in general statewide were already on the ropes before the tower fell; the collapse was a knock-down punch.

Gardner had just three companies willing to give him a quote after the association got notices its insurance would not be renewed under the same terms. The reasons for denials ran the gamut – the building's too old, it has cast iron pipes, there's no sprinkler system, the roof is 21 years old.

"It goes on and on," Gardner said. "It's just nuts right now."

And it's likely to get more expensive for owners under the new condo law approved during a special legislative session. The new law took effect when Gov. Ron DeSantis signed it May 26 but most safety provisions do not kick in until late 2024. It requires maintenance accountability measures on older condos three stories or higher, such as engineering inspections and dedicated reserves to pay for fixes.

For the 140-unit Portofino South, the insurance pinch is first.

And it comes as the Portofino owners are looking at another hit, too. Unrelated to the Champlain Towers collapse, Portofino also must by law install a sprinkler system by Jan. 1, 2024 – an expense that will cost at least $7 million.

The new, post-Champlain law requires a structural integrity reserve study to determine how much money is needed for future major repairs to be completed by Dec. 31, 2024. Following completion of the report, condo boards must reserve funds for projects identified in the report and cannot use those reserves for other purposes.

"Condo living as we knew it in Florida will no longer exist," said Jan Bergemann, president of the statewide property owner's advocacy group Cyber Citizens for Justice, which has lobbied for increased condo safety regulations. "I can assure you, as much as these reforms are needed, it will pry a lot of owners out of their homes because the costs are going to be huge."

West Palm Beach attorney Michael Gelfand, who served on the Condominium Law and Policy Life Safety Advisory Task Force set up after the Surfside collapse, said there is a concern people will not be able to afford what is coming.

Years of lax state oversight, weak regulations, and volunteer condo boards reluctant to levy heavy dues on their friends and neighbors have allowed buildings to deteriorate, he said. Champlain Towers South had about $706,000 in its reserves as of January 2021, according to a review the year before by the company Association Reserves. But it needed more than $10 million for projected repairs.

"After decades, the real cost of housing will be recognized for those who actually own and occupy condominiums," Gelfand said. "If people can't afford it, they will have to move. That is not an easy thing to say, but that is what it comes down to."

He suspects some condominiums will vote to sell out to developers in lieu of paying millions of dollars in assessments. The process, called condominium termination, isn't new but may attract developers with plans to demolish buildings and replace them with new construction. With the real estate market still humming in South Florida, beachfront properties are in high demand.

An April Wall Street Journal article notes that a handful of Miami-area condos have already sold to developers.

"We are going to see the vultures come in, and in some situations, they will make an offer that can't be refused," Gelfand said.

With the insurance market in shambles, some condominiums have turned to the state-run Citizens Property Insurance Corp. for coverage. In Palm Beach County, the number of condominium associations covered by Citizens in buildings 40 years and older increased 64%, from 402 to 662, between April 2021 and May 2022. On buildings younger than 40 years, policies increased 70% from 144 to 244 during the same time period.

Portofino South was able to find private insurance this year and Gardner hopes the insurance legislation passed during the special session will help next year.

"But I have no idea what's going to happen," he said.

Some Portofino residents are paying more for their individual unit insurance as well as the association increase. Vicky Ross, 79, was canceled from her private carrier earlier this month and had to enroll with Citizens, which included a $500 rate hike. In addition, her association dues will go up $433 a month.

Throughout Palm Beach County, the number of personal residential condominium policies written by Citizens increased 61% in buildings 40 years old and older between April 2021 and May 2022. In buildings younger than 40, it went up 43%.

"All I know is at the end of the month, I won't have the little surplus I had before," Ross said.

Portofino South condo owner Margaret Daley, 82, has been a full-time resident of the building for eight years but has been visiting it since it opened in 1971 when her parents bought a unit there. A former association vice president, Daley said the building has been well maintained, was just painted and recently completed a restoration project.

She's had no concerns about its safety, even after the Surfside collapse. While she doesn't like the higher costs, she's not overly concerned.

Still, Portofino association President Gregory D'elia is nervous about how owners on fixed incomes will pay for the increases, and he's angry with lawmakers for letting boards get away with putting off repairs for so many years. He'd like to install new elevators, but instead he has to budget for the sprinkler system, which was originally required to be completed by the end of 2019 but had its deadline extended to the end of next year.

"My frustration is the Legislature turned a blind eye to this," he said. "Where were you all this time so that Champlain didn't happen?"

The unknown is what scares others, including McSwain, who said for now she'll dip into her savings to pay the extra costs.

"I just don't know how many more increases or special assessments there can be," she said. "A couple of people in our building are on fixed incomes and they said they just can't absorb this."

Kimberly Miller is a veteran journalist for The Palm Beach Post, part of the USA Today Network of Florida. She covers real estate and how growth affects South Florida's environment. If you have news tips, please send them to [email protected] support our local journalism, subscribe today.