The Florida Insurance Crisis Explained: Impact on Condominium Associations

Today we’re delving into a crucial issue that’s been casting a shadow over many condominium associations in the sunshine state – The Florida Condo Crisis. Join us on this exploration as we unravel the complexities and understand how this crisis is significantly impacting property owners and their insurance.

Let’s unpack what the Florida condo insurance crisis entails. In recent years, the state of Florida has found itself at the epicenter of a growing storm in the insurance landscape, particularly within the property insurance sector raising premiums at unprecedented rates. These actions have had a massive impact on condominiums especially, for multiple reasons. Let’s break it down:

Pre-pandemic, Florida was a major retiree and second-home state, especially in places like South Florida, where our law firm is located. It was a great escape for people coming from the north east and the Midwest, and the cost of living here was significantly cheaper. Back 20, 30 years ago, people were buying condos as their retirement or vacation home, but even for local Floridians, it was a much more affordable area to live. Many people were scooping up condos for as low as $50,000 to a few hundred thousand dollars, and the original HOA fees for many of these places were in the few hundred dollar range.

Now, property owners usually associate their homeowners and condo associations with annoying letters to cut your lawn or clean your windows. But associations also play a crucial role in planning for the maintenance and replacement of common areas. Condominium associations are responsible for things like roof replacement, window cleaning, preserving the structural integrity of the building, and maintaining insurance to cover the entire building in case of a loss, like a hurricane or other event.

Board members have to plan for reserves in order to complete the building maintenance and repairs and to pay insurance premiums. The downfall is that the property owners of these associations often have the power to veto increased associate fees or to limit the amount of the increase. This widely led to associations failing to have enough in reserves to cover important things like roof repairs and building maintenance. But even those associations who adequately planned for enough funds to cover major maintenance, insurance and repairs, didn’t foresee a looming crisis….

Fast forward to the pandemic boom. Everyone associates the pandemic real estate boom with an unprecedented increase in home prices. Homes and condos across Florida were selling for two times more than they sold for just a few years before—or even more than that.

But what also inflated was material and labor cost for home building and home repairs. Suddenly, projects for things like roof replacements, pipe repairs, and even building a new home, were getting quoted at 50% to sometimes 150% more than pre-pandemic numbers.

Plus, we had harsh weather events, like hurricanes, tornadoes, floods, and other windstorms, happening more frequently and at a greater intensity than we saw in the decades previously, especially in places like Florida, but also in locations like Texas and Louisiana.

So what does this mean? How did this pandemic boom and harsher weather events create a “condo crisis” in Florida?

Because people can no longer afford to live in their homes. 

This insane increase in building material and labor prices in such a short period of time, coupled with greater intensity in weather events, led insurance carriers to freak out. They started raising rates and premiums like crazy. Property owners across the state began getting letters from their carriers saying their premiums would double at renewal, and some homeowners looking for new insurance after a non renewal were getting quotes for 3-4 times their original policy. Someone who was paying a few hundred dollars a month might now be getting quotes at $1500+ per month. Most people cannot afford that kind of cost-of-living increase. 

But that’s not even the worst part.

Condo building insurance has also skyrocketed. Remember when we discussed that condo associations are responsible for maintaining insurance on the building? Well, those premiums have skyrocketed, too. Sometimes even at greater increases than individual condo owner policies. What do you think this means? It means that the Association fees are now also skyrocketing to cover the cost of these premiums.

So now, not only does the condo owner have to eat a greater monthly payment for their own condo policy, They also have to make up the difference for increased association fees to cover the increased cost of maintenance, repairs, and insurance.

In short, the people who bought these homes a decade ago or more cannot afford to live there anymore. Especially people like retirees who are on a fixed income. No one accounted for their cost of living to increase by 20 or 30% in just a few years. Even people who bought properties in the past few years might be experiencing hardship if they made a stretch to purchase a home at a monthly payment they thought they could afford, that might now become unaffordable.

And many of these people aren’t able to sell their home because the boom landscape has shifted, and buyers are unable to purchase these properties with these high interest rates and increased costs. So that leads us to the question: What can we do?

Well, are you an association board member or an individual property owner?

As a board member or someone who works with associations, there are a few actions you can take:

1) The first is to review your insurance policies. Or have them reviewed by an attorney; that’s something our firm offers to condo boards and CAMs. There might be areas that you can improve to reduce your premiums or ways to restructure your coverage to reduce costs—or at least to slowly increase them over time rather than skyrocketing all at once. We can help with this.

2) Second, consider a claim for damages by a covered event. If you are facing issues getting a policy or higher premiums because of existing damages, we can help get an inspection to determine the cause and coverage for those damage. Many people shy away from making claims, but your premiums are going up anyway. Talk to an attorney about what is available.

3) Third, educate your association members. Be honest and upfront with property owners about the issues faced across the state, and explain why raising fees is in their best interest in the long term. Share this video with them if you like, so they understand it’s not just the dollar amount they see coming out of their monthly expenses, it’s the protection of their homes and their home’s value.

Now, as an individual property owner,

Regarding your condo association, as we just mentioned, remember that it’s also in your best interest that your board maintain the building and adequate insurance so that your home and your investment are covered. We realize that it’s difficult for many families to account for increased living expenses, but you can request that your board offer tiered increases over a period of time, rather than raising the rates all at once. Request that the board consult with an attorney about coverage options or the possibility of filing a claim for recent damages. 

And, you can assess your unit’s individual policy and coverages. Again, consider consulting with an attorney and having your unit inspected to determine if discounts or creative reductions in coverage are available to you. The situation may be rocky, but as we see time and time again, people in Florida are more than capable of weathering the storm with the right tools and determination. 

Whether you are a board member, CAM, property manager, or property owner in need of assistance with your property insurance claim or policy review, Premier Property Law is here to help. Give us a call at (954) 233-0120 or fill out our contact form.