How did a small Florida condo meet the state’s strict rules? Costs have been reduced.

Shortly after the devastating collapse of Surfside Champlain Tower in 2021, officials from aged condominiums in the neighbouring Bay Harbor Islands realized they would be better off putting together their actions.

Their much more modest building, the three-storey Golden Key, was in the shape of OK. Luckily, it was well built in 1964, but President Andre Williams and fellow board members knew that the concrete balcony needed to be heavily strengthened. The roof was at the end of its lifespan, with a faded pale yellow colour that the exterior had sported for the past 20 years.

Golden Key faces a 60-year recertification, and like many other condos in South Florida, owners of almost limited measures avoided adding themselves with anticipated repair ratings, Williams said.

Now, Williams and his board colleagues concluded that it was time to stop procrastinating. They correctly thought that state regulators and insurance companies trying to avoid another catastrophe began cracking down on old condos and needed to be ready.

“I immediately saw the collapse and knew I had to move on,” said board member Salvador Rosenblatt.

Results: Four years later, many South Florida condominiums have met the deadline to file inspection reports, struggle to install reserves for future major repairs under strict new state law, and are reaching secret semi-government blacklists that are difficult for owners to sell.

Reduce costs

Golden Key is not unique. If most condominiums are navigating the new regulatory environment, experts say. But the Condominium Committee and longtime managers show how even due diligence, even non-rich owners, can save affordable old condominiums that Florida has made widely available without breaking anyone’s banks.

The 24-unit condominium building in a simple Miami modern architecture style shines with a new white and bone-moving color scheme. The rebuilt structural support of the balcony is solid. The new roof lasts for at least 15 years.

The building was recertified and submitted a milestone inspection report that required a state deadline by January 1st, and created a reserve fund.

Better yet, Williams and his board managed everything without sopping owners on a massive valuation, even if construction costs skyrocketed and premiums for South Florida condominiums doubled and tripled.

This means that, near the water, within walking distance of first-class shopping, dining, school and the beach, the building remains a safe, attractive and extremely affordable place for owners and residents, including retirees and young couples and families.

Most units are occupied by the owner. Several, including the second apartment that Williams owns other than what he had lived in for 20 years, are bound and rented as investments. The market value of the units, all of them one bedrooms, are valued at $218,813 by the Miami-Dade County Real Estate Appraiser’s office.

Williams, Rosenblatt and longtime property manager Heli Krezenbauer, said they were not magical formulas. Repairs and maintenance must be planned and maintained. This saves a lot of money. Golden Key costs are still rising, but at a manageable pace.

For example, one of their rewards for hard work was that insurance companies gave discounts when they were rapidly increasing. Their insurance has more than doubled compared to where they stood in front of Chanplain Tower in 2020, but even so, the maintenance fee for each unit is at a medium $641 a month.

“Maintenance in 2019 increased from $300, but we haven’t seen $50,000 a year, at least like some,” says Kletzenbauer.

“Go in front of the curve”

Predicting repairs means they were able to surprise ratings and spread payments over more years, they said.

“We wanted to get ahead of the curve, but we didn’t want everyone to be financially lame,” said Williams, a real estate lawyer, advisor and investor.

Certainly the small size of the golden key and simple construction (a three-storey shell of concrete with a concrete roof) is advantageous. That means you are likely not to face complex structural or other repairs that are more expensive than the value of the building. And the builders didn’t cut corners as developers later began during the local condominium boom of the 1970s, Kletzenbauer said.

“The building had good bones,” said Krezenbauer, whose Havana-based European-American real estate services manage about 25 buildings in Miami and the Beach. “It had a really good structure to get started.”

But even a small group of owners said that when he was first elected to the board a decade ago, he initially reluctant to work on repairs.

Williams, who first bought at Golden Key as a young lawyer in 2002, said he was not interested in being close to his mother in Miami Gardens, in part, to join the board in the first decade. After some persuasion, the owner agreed to an assessment to replace the entire system.

The board of directors and Kletzenbauer then worked on maintenance and repairs as the needs arised. When the elevator needed repairs, they fixed it. Shortly after the collapse of the surfside, after cracks appeared in the balcony railings, they got worse and hired contractors before the costs rose. Same as the roof.

One in 2022, and in 2023, the special rating was $2,800 per unit each.

Regular maintenance projects offered another advantage. Kletzenbauer has been in business in Miami for decades and has been able to introduce trusted contractors and inspectors to the board. It proved particularly valuable as condos faced with new state requirements faced tough competition for good contractors and reliable, capable inspectors.

“One of the benefits of being forever is that you can find someone who can do the job for you,” Kletzenbauer said.

With work and planning done, recertifying and meeting the new state requirements went smoothly.

“They were already ahead of the game,” Krezenbauer said. “Every time there’s a little crack, we’ll deal with it right away. When this last round of structural inspection came out, there were no major issues. There were small issues that needed to be addressed. We fixed the cracks and painted the building.

Rather than keeping things under control, things were going well, and it was easier, cheaper to do repairs, increase ratings and reduce the burden on unit owners, making board management easier.

“The careful board listened to my proposals and had the foresight to deal with these issues quickly enough, so it didn’t become a bombshell to us,” Krezenbauer said. “Finally, it wasn’t a huge number, so it was much easier and not urgent, so they were able to stretch it for years.

“It was more manageable because there was less pushback from the owner.”

Meanwhile, the required state inspections gave us a roadmap for the future. They look forward to updating their plumbing and work with contractors on estimates and planning.

“We know we need to draw again in 10 years. We need to start the roof again in 15 years,” says Kletzenbauer.

In a condo in Miami, even some of his clients, that’s not necessarily the case.

And he said the condominium building, which skimmed maintenance and repairs, is now paying quite a hard price. Funding was difficult when the building faced a massive assessment to tackle backlog repairs. That’s because banks don’t consider safe investments, Williams said. And the blacklist maintained by federal mortgage advocate Fannie Mae makes it virtually impossible to obtain a traditional loan.

“In the end, they’re all losing, and that’s the way we do it now,” Kletzenbauer said.

The good condition of the building and its finances also lead to better investments for the owner, Williams notes. He bought a second unit in the building and added it to his portfolio of condominiums he has.

Developers may still move

However, he does not know how long he or his neighbors have been in the building. Ironically, all the improvements they undertake will leave the building well placed for bulk purchases by developers who will demolish it.

That’s because Bay Harbor has become a massive magnet for redevelopment. The easternmost Bay Harbor Island, zoned for apartments and condominiums, has been constructed by construction crane fur as a swarm of Mimo buildings from the 1950s and 1960s gradually faded and the condominiums were replaced by millions of flashy new buildings.

Williams said the board is already approached by developers interested in buying everyone. They are not ready to sell yet, he said, but they may not be able to stand it that long.

And when that happens, the higher value of the unit guaranteed by the excellent condition of the building means that the owner can get a better deal than if they were forced to sell due to affordable repair costs and economic despair.

“Buying here was the best financial decision of my life,” Williams said. “I don’t think any of us expected it to explode like Bay Harbor has. The prices would have to be right, but we wouldn’t take our grandson here.

“At some point, some developers make an offer that we cannot refuse.”