After Surfside, a major national condo reform is quietly going into effect
Deferred maintenance and deferred repair work in the Champlain Towers South building are well documented. Now, disclosures will have to be made.
A major national condo reform is taking place in the wake of last summer's Surfside condo collapse that left 98 dead.
But this reform is not from the government per se. It’s coming from Freddie Mac and Fannie Mae, the federal government-sanctioned companies that buy mortgages from banks.
WLRN is committed to providing South Florida with trusted news and information. As the pandemic continues, our mission is as vital as ever. Your support makes it possible. Please donate today. Thank you.
Both companies will now require home lenders to collect a broad array of information about building maintenance records and needed repairs for new mortgages in buildings that have five or more units.
Fannie Mae’s new rules went into effect on January 1. Freddie Mac’s go into effect on February 28th.
Due to the fact that both government sponsored companies buy loans directly from banks, the companies can essentially force banks to comply with the new rules and disclosures.
“This is gonna start to un-peel the dirty little secret of homeownership, and that is: In condominium and homeowner association communities — not just in South Florida, but nationwide — when folks buy in, they frequently don’t calculate what the real cost of continuing ownership is,” Michael Gelfand, West Palm Beach-based condo law attorney, told WLRN.
“They buy looking at the purchase price,” he continued. “They do not buy anticipating what is the cost of maintaining that structure.”
The new rules hope to bring more transparency to that reality for both new homebuyers and lenders.
Both Fannie Mae and Freddie Mac will require homeowners associations or management companies to fill out a specific form. It will list details on maintenance history, repairs, the number of unit owners that are already delinquent on money needed to maintain the safety of the building, and some basic disclosures on whether the building has reserves for eventual repairs and maintenance needs.
On its website, Freddie Mac says the decision to start requiring the new disclosures explicitly came in response to the Surfside condo collapse and the feedback it heard on the aftermath of that disaster. Deferred maintenance and repair work in the Champlain Towers South building that collapsed are well documented, and might have played a role in that tragedy. Federal authorities continue to investigate.
Gelfand said the new rules will have an immediate impact on the real estate market, specifically in pricing.
“It should, in a rational market, cause prices to increase because folks are gonna have to take into account what the actual costs of owning a property is,” he said.
He then added, about South Florida: “Gotta caution — in this overheated market nothing is rational.”
The new rules fully go into effect on February 28th. That means many condo sales that have already entered into contract will likely have to abide by the new rules.
Both Fannie Mae and Freddie Mac say the new rules are "temporary," though they list no end date for the new policy.