It's a "disastrous path these developments are on"
It’s been more than a year since the Champlain Towers South condo building suddenly collapsed in the Miami suburb of Surfside, Fla., killing 98 people. Following the tragedy, a reform bill was passed to prevent similar disasters from occurring. Fannie Mae and Freddie Mac also toughened their loan standards on older buildings to ensure structures were safe for condo borrowers and lenders.
Orest Tomaselli, president of project review at CondoTek, joined the latest episode of MPA TV to discuss the impact of the Surfside condo collapse on the industry and the challenges of implementing the new guidelines.
“I think, all in all, they’re [guidelines] game-changing for the industry and condominium boards and lenders for sure,” Tomaselli said. “I think that the spirit of them is fantastic, meaning that… you really want to make sure that these properties are in good working order, that their components are maintained in an adequate fashion, and that they have enough capital set aside in order to make future repairs on these developments.
“What is difficult to swallow is the fact that these guidelines almost seemed instantaneous, meaning that Fannie Mae came out with their guidelines in January, and instantly we were the industry that was forced to comply with them.”
Tomaselli estimates that it’ll take approximately three years for developments to start figuring out which components must be repaired or replaced and which structural inspections have to be done.
“Setting aside enough capital, or setting up the process of setting aside enough capital… it’s going to take a while to happen,” he said. “And I think my biggest issue with it is not that the guidelines aren’t good, because I think they’re great, and I think they’re needed in the industry… but it’s the timeframe in which these developments are required to comply with these guidelines.
“So, there is a major headwind coming for these developments. And what we see happening is that, unfortunately, we see prices are not only going to level out. In many of these existing established developments and even some of the new construction developments that are being created right now, we’re going to see price drops and value drops, especially on properties that do not comply with these lending guidelines. I mean, that’s almost a disastrous path that these developments are on.”
Tomaselli provided a more in-depth look into the issues the condo market faces and how tragedies like the Surfside condo collapse can be prevented. You can watch his full interview here: What impact did the Champlain Towers South collapse have?
