Buying a Florida Condo: Taxes, Reserves, Approvals, Etc.

There are substantial differences in how Florida condos operate both legally and practically compared to other states. Here are some things you should be aware of before buying a condominium property in Florida.

Florida Condo Property Taxes

In Florida, individual condo unit owners are responsible for all condo property taxes. Condo associations don’t pay any Florida property taxes on the building, amenities, or other common areas.

Instead, the property tax valuation of each condo unit considers both the unit itself and the use of common areas.

Once you’ve determined the value of your condo, property taxes work the same as a single-family home or other types of properties.

If you intend to make your condominium property your primary residence, you can qualify for the Florida Homestead Exemption. The Homestead Exemption limits property tax increases by limiting annual increases in your condo’s assessed value.

Florida property taxes in most counties will work out to just under 1% of your condo’s value. Tax rates are set at the county level, so you’ll need to check the rate for the county you’re buying in.

Most counties allow you to look up a property’s tax history online. However, because Florida limits assessed value increases for current owners, most buyers will see a large increase in property taxes. The assessed value resets after a sale.

Florida Condo Reserve Funds

Many condominium associations in Florida have been historically bad about keeping adequate reserve funds. Unit owners frequently include retirees and short-term residents who vote down building reserve funds for future expenses.

When a condo has inadequate reserves, unit owners see large special assessments or increases in dues even for expected work like roof replacements. If you don’t do your homework, you could be faced with a five-figure or larger assessment shortly after buying.

The collapse of the 12-story Champlain Towers South condo building in Surfside near Miami brought new attention to Florida condo law reserve requirements. The collapse was blamed on the delay of tens of millions of dollars in deferred remedial work needed to correct structural integrity issues.

Since 2022, the Florida Condominium Act requires every condo building three stories or taller to conduct a structural integrity reserve study every 10 years. The study includes a visual inspection by a licensed architect or engineer for substantial structural deterioration.

Starting in 2025, condominium associations will be required by law to maintain adequate reserves for:

  • The roof
  • Load-bearing walls and other structural supports
  • Floors
  • Foundation
  • Fire protection systems
  • Plumbing
  • Electrical systems
  • Waterproofing
  • Exterior painting
  • Any other item that has a deferred maintenance expense or replacement cost greater than $10,000

The needed reserve fund depends on the expected replacement or maintenance date.

For example, if the roof will need to be replaced in 10 years at a cost of $1 million, the association must set aside $100,000 per year. If a major maintenance overhaul will cost $100,000 in five years, the association must set aside $20,000 per year.

Neither the association’s board nor the condominium association unit owners may vote to delay building reserves or keep a lower amount in reserves.

If you’re buying a condo within the next few years, you should be aware of 1) whether your condo has adequate reserves for planned and unplanned expenses in the short-term, and 2) how much you’ll need to pay if your association doesn’t currently meet the new reserve requirements.

Florida Condo Board Approvals

If you’re familiar with condo boards in big cities, the condo board approval process can sometimes be as intense as applying for a job at the CIA.

While the Florida Condominium Act allows condo board approvals, most boards don’t approve buyers or have only minimal requirements. This is due to a combination of legal difficulties created by Florida condo law and short-term thinking by condominium associations.

As a result, a new unit owner often won’t need to meet any income or asset requirements (except for a mortgage loan). Therefore, many unit owners may be in a position where they can’t afford to vote for any increases in dues or special assessments.

Many Florida condo buildings are dated and have cut amenities over time. While the new law should reduce issues related to structural components, Florida condominium associations can still have difficulty getting funding approved for other upkeep or improvements.

There’s also a chance that Florida condominiums could see a fall in prices if the new reserve requirements force many unit owners to sell because they can’t afford additional monthly costs.

Florida Condo Association Dues

Even when condominium associations don’t maintain adequate reserves, monthly condo dues often make up a substantial portion of the rent for a similar apartment. When you add in your mortgage, insurance, taxes, and other costs of ownership, buying a condominium property often won’t be worth it.

Common reasons for excessively high dues include:

  • Maintaining expensive amenities such as swimming pools
  • The association’s board hiring friends and relatives as contractors at inflated prices
  • The condominium association hiring an outside property management company that provides minimal services at an inflated price

Before you decide to buy a condominium unit, it’s important to research exactly what the dues go to, how often they change, and how they can be changed. You’ll also want to try to find out as much as you can about the condominium association itself.

Most information you need isn’t public records, and condominium associations often aren’t willing to give you any info until you’re under contract to buy. You’ll either want to talk to current owners or work with a real estate agent who specializes in condominium units.

Getting a Mortgage for a Condominium Property

Getting a mortgage for a condo can be more difficult than getting a mortgage for a single-family home.

Some lenders won’t work with condos at all. At the lower end of the market, you might find that the amount you need to borrow is lower than the minimum loan amount for many lenders.

In addition, the condo building has to be on an approved list for conventional, FHA, and VA loans. Many residential condominiums are not on these lists because the association won’t go through the approval process that requires a close look into its finances.

Finally, don’t forget that monthly condo dues are included in your debt-to-income ratio. So if you’re approved for a $1,000 monthly payment and dues are $400 per month, your maximum mortgage payment is $600.

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