Condo owners face fallout from ‘seminal event’

Many condominium residents are blissfully unaware of how an impending deadline will affect their bank accounts and, in some cases, their mailing addresses.

John Cadden, managing principal of Condominium Advisory Group, said others realize the potential effects but remain “in total denial.” The people and investment firms operating over 200 buildings in St. Petersburg must comply with new legislation and complete Milestone Inspection Reports by Dec. 31.

Senate Bill 4-D also requires condo associations to increase repair funding reserves, and some owners now face six-figure special assessment fees. Cadden said those who have prepared and participated in meetings will fare exponentially better than owners who have enjoyed relatively low-cost living for decades.

“Some communities I’m working with are really on top of it,” Cadden said. “And I’ve got others in the ambulance, already heading to the emergency room, but they don’t believe it.”

Cadden, who has worked in real estate for 40 years, narrowed his professional focus to condominiums in 1998. He began overseeing “termination projects” when Florida property values started to surpass building values even before the Chaplain South Tower collapsed June 24, 2021.

The catastrophe – still under investigation and blamed on several factors – killed 98 people in Surfside, Florida. In its aftermath, Cadden formed his Orlando-based consultancy group to help condo owners and associations navigate a rapidly changing landscape.

However, he called the collapse a “seminal event” that “encapsulated the absolute worst of everything that has occurred with condominiums over the last 25 years.”

SB 4-D established a 25 or 30-year program for cooperative and condo buildings. Those within three miles of a coastline and built before July 1, 1997, must abide by the earlier timeframe.

The legislation applies to buildings with three or more stories. It also encompasses commercial structures with occupancy limits exceeding 500 people.

All 225 qualifying condo buildings in St. Petersburg must submit milestone reports this year. City officials submitted required 180-day notices June 28, and, as of July 11, 68 have complied.

“There’s boards that believe they can get out of this,” Cadden said. “There are owners with no clue of what’s going on in some of these places. It really just depends on each community and how they’re being run.”

John Cadden, managing principal of Condominium Association Advisory Group.

Much of Cadden’s work encompasses South Florida. While he has yet to offer official advice to local owners and associations, he is familiar with the area and market.

Cadden toured St. Petersburg in the spring and said to disregard the newer buildings. The concern centers around those over 30 years old. “Common sense will tell you when something’s been really well taken care of, average or in trouble,” he explained.

Cadden said old roofs, peeling paint and parking lot potholes present red flags. He also noted that weather plays a significant role, particularly in a city surrounded by water.

“Stucco buildings from the 1990s and ‘80s – you know there’s water infiltration somewhere,” Cadden added. “And I hate to use this word, but one person’s ‘yuck’ is another person’s ‘That doesn’t bother me.’”

He expressed empathy for those affected, especially elderly residents. Howard Konetz, 79, faces a $224,000 special assessment on his South Florida condo. WPLG, a local broadcaster, found that some of his neighbors received bills topping $400,000.

Cadden is less sympathetic to owners who bought foreclosed condominiums on or near the waterfront for $75,000 following the Great Recession. In many cases, the governing board has kept dues and improvements to a minimum while residents vote against maintaining emergency reserves.

In addition, Cadden said “no one” attends those board meetings unless it’s time to oppose necessary cost increases. “The people who benefitted from all that low-cost living are now complaining.”

“They didn’t realize it at the time, but it just all caught up to them,” Cadden said. “You’ve deferred all the costs. So, what the new laws have done is they have taken it out of the hands of owners and boards. Champlain Towers was a great example. They had $15, $17 million of work to do, and they couldn’t get a vote to do it.”

Cadden said he is working with two clients that now oversee empty buildings. Those residents preferred to move rather than pay the assessments.

He believes sale prices will plummet or stop altogether due to the additional fees. Cadden also noted that in many instances, a contractor provides a repair estimate in the millions, and the building’s leadership “finds a guy” willing to complete the work for half the price.

Many residents forced to move will soon realize they can no longer afford the life they grew accustomed to in today’s market. That could exacerbate the affordable housing crisis.

“My advice is always the same – start paying attention,” Cadden explained. “Start going to meetings. Start participating in the process and asking questions.

“We’re curing the symptoms of a system that isn’t working. I think, three or four years from now, everyone’s going to be a lot better off. Nothing stays good forever.”