This blog has previously discussed the June 24, 2021 collapse of the 136-unit Champlain Towers South condominium project in Surfside, Florida and Fannie Mae’s response by issuing Lender Letter (LL-2021-14) which directs lenders to gather information from owners’ associations about potential unsafe conditions.
As we near the anniversary of the disaster, a $997 million settlement has been reached for the wrongful death victims and survivors. The settlement was announced in the Miami-Dade Circuit Courtroom of Judge Michael Hanzman on May 11. The settlement includes insurance companies, developers of the project next door, engineers, architects, a law firm, and the owners’ association.
The building has now been demolished, and the settlement does not include the potential sale of the underlying real estate, which will be auctioned later this month. The opening bid is $120 million. A prior settlement of $83 million was reached for economic losses.
Judge Hanzman will oversee the division of the settlement funds among the victims. He has announced that he would like to have the process completed by September.
South Carolina has many aging condominium projects, particularly along our coast. And we have an earthquake fault line to consider. Do our local homeowners’ association boards face expensive repair and reserve dangers like those in Florida? Should condominium purchasers consider the financial impact of possible major assessments to address delayed repairs? Should legislation be proposed to address these issues?
I’ve previously recommended Episode 8 of the podcast “Collapse: Disaster in Surfside” produced by Treefort Media and the Miami Herald for an excellent discussion of the legal and financial issues surrounding aging condominium projects.
Once these huge projects are completed, there is no legislative requirement for future inspections. The county in Florida where Champlain Towers South was located has a requirement to inspect tower projects after forty years. Forty years is a long time! Champlain Towers’ forty-year inspection had found the potential problems, but there were no “teeth” requiring the repairs to be made. The property owners of Champlain Towers were aware of the need for expensive repairs, but they continued to kick the can down the road to avoid the expense.
After the collapse, Florida’s legislature considered an act which would have required reserves and inspections, but the legislative effort failed because of the fear of chilling South Florida’s development frenzy. My guess is that South Carolina would face a similar roadblock.
Some condominium projects have served as affordable housing in certain geographic locations and as affordable second homes and rentals in resort areas. The podcast suggests that tacking on the annual cost of reasonable reserves may threaten this affordability. Think about elderly individuals who live in their dream coastal condominiums. Taken to a logical conclusion, these projects, properly run, may become available only to the wealthiest among us.