A common trap buyers of Florida condos fall into is seeking out the associations that have the lowest monthly or quarterly fees. This is understandable especially for those that are financing their purchase. In theory the lower the fees the more purchasing power they have. I am going to explain why this is a bad approach and will become a big problem for those buyers that based their purchase on low association fees when new laws go into effect in 2025.
One way a condo association can keep their fees low is by not maintaining a reserve fund for repairs. Instead, they just hit the owners with assessments when those major repairs or renovations are needed. The problem with that is not everybody has the money in their savings when unexpected assessments come up. It also makes selling a condo that has pending assessment difficult. The number one question potential buyers of condos have is “are there any pending assessments?”. If there are pending assessments, good luck trying to get the buyer to pay them. You are likely going to be on the hook for it.
Another way condos can keep their fees low is by scrimping when it comes to insurance. I big chunk of your condo fees goes to pay for the master insurance policy. Associations can save by choosing a higher deductible on the policy. Sometimes the association has no choice due to insurers pulling out of Florida. Sometimes, they do it just to save a few bucks. But these savings just make it harder to finance a condo.
Earlier this year I wrote about Florida Bill SB 4D that was signed into law this year and goes into effect on Jan 1, 2025. Which isn’t very far off. It requires condominium and co-op associations in Florida to maintain reserve funds for the repair, replacement, and maintenance of the common elements of the community. The bill applies to all condominium and co-op associations in Florida, regardless of the size of the community.
There are going to be a lot of condos that will be playing catch up soon, and that means assessments all over the place. Low condo fees are a red flag that the association does not have adequate reserves and will need to levy assessments, in order to be in compliance with the new laws. Condos with a large population of retirees on fixed incomes are notorious for avoiding repair reserves to keep their fees low.
I prefer not to have surprise expenses. You can pay now, or you can pay later. In the end you will be paying. Be sure to take a close look at the association’s budget. A reserve fund of 10% of the income is preferred. It is the benchmark most lenders are looking for as well.
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Serving The Greater Fort Lauderdale area since 2006
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