Category Archives: BoB Series: Buyer’s Notes

Buyer’s Notes: Miami Beach’s Affordable Housing Sector


Image: Nestled in between the Akoya and La Gorce Palace towers, the 49 year-old Casablanca Condominium is undergoing a 5.5 million dollar recertification.

Investing in affordable housing on Miami Beach is a tricky business. Although present throughout the beach, older and more affordable condominiums are predominately located from 40th street to about 70th street. This includes the Carriage House, Castle Beach Club, Alexander, Corinthian (1967), Casablanca (1948), Pavilion, All Seasons, Tower 41, Marlborough House (1963), and Maison Grande, to name a few. From 40th up towards 70th street, the area is filled with these types of condominiums.

These buildings all have something in common. They are either past due on the required 40 year re-certification or due for one soon. This is critical for a buyer. A 40 year re-certification involves addressing all life safety, mechanical, structural, and electrical issues the building may have. In some cases, these buildings require millions in construction to get them re-certified.

Not having the 40-year re-certification means the city can condemn the building as it did the Castle Beach Club. The Castle Beach Club remains closed and unit owners footing a $25 million bill for necessary re-certification repairs.

Due to the high cost, risk, and inconvenience of the 40-year re-certification process, it is better to buy in a building that has been re-certified.

There are ways to minimize the risk of this type of purchase:

  • Your Realtor should have the seller provide you with the minutes of the Board of Directors meetings. Reviewing minutes can also reveal litigation against the Association that a buyer would inherit, the state of political affairs in the building, and any pending projects that may result in special assessments.
  • Request a copy of the budget. This will tell you if the reserves are being funded–again, another way of preventing a special assessment.
  • Contact the City of Miami Beach’s Building Department. They can provide information regarding the status of the 40-year re-certification as well as an inspection and violation history.

If an older condominium has been re-certified, has well-funded reserves, no litigation, and a relatively stable Board, it may represent a low cost investment and high value potential.

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Buyer’s Notes: What You Need at New Construction Closing

What should you expect from the condo developer at closing? This is important to know, because this is the critical point where the buyer receives most of the information pertaining to the community. It is important to note that developers do things differently and may not include some of the information that is listed in this article. If this is the case, you should make it clear to the developer’s staff that you want the information and they or the management office should immediately make it available to you. Not having the information below means that you may have trouble: reporting and resolving basic problems, properly maintaining unit appliances and fixtures, dealing with a community emergency, and understanding the framework of guidelines that allow the community to operate. With that said then, what should you expect at closing?

Key, Clickers, and/or any other access items: At the time of the closing completion, you should receive your unit’s keys and other access materials. If this is not the case, you will only be delayed in accessing your own unit. If these are not provided at the time of closing, it is important that the developer provide specific instructions to receive the access items that same day.

Owner’s Manual (General Information and Warranty book): This book/manual typically includes the community’s general information –

    • Name and contact information of property manager

    • Insurance information for the Condominium

    • License information for General Contractor

    • Forms (Vehicle Registration form, Pet registration form, Indemnification forms, Confidential Resident Contact Information form, Unit Access authorization, Architectural Modification request form, Change of Ownership and/or billing Address form, Contractor Insurance & License request form, Move-in/Move-out authorization form, Move-in and Move-out deposit form. The final form will likely be a receipt authorization form that will be a checklist for all the other forms.

    • Rules and Regulations (The R&R form should be organized by physical assets and issues (i.e.: windows, roofs, terraces, parking and pets)

    • Community By-Laws (the By-Laws should be accompanied by a date sheet that enumerates that date of elections, the annual meeting, and budget meetings). The By-Laws will detail what powers the Board has, the role of the Management Company and the community’s employees, and the various details regarding Board meetings, membership, candidacy requirements, etc.

    • Appliance Warranties, Maintenance, and Troubleshooting Information: Most communities will not be decorator-ready (un-furnished). Therefore, all included appliances should be covered in this section of the manual. This will typically include the oven/cook top, wine cooler, kitchen faucet, trash disposal unit, water heater, refrigerator, Dishwasher, Washer and Dryer, and Microwave)

    • Emergency Procedures: This section will detail what procedures shall be followed in the event of a flood, fire, power outage, hurricane, and/or other disastrous event. Included in this section should be emergency contact numbers for the respective municipal authorities as well the property management company.

    • Owner/Association Responsibility Chart: This chart will detail the unit owner’s physical maintenance responsibilities compared to the Association. It will reference the Condominium Declaration and explain what legal parameters exist that separates various maintenance responsibilities. This will typically involve information pertaining to what to do about leaks, window water intrusion, malfunctioning appliances, plumbing problems, intercom issues, etc. This is especially important for first time condominium buyers who are unsure of these responsibility disparities.

    • Telephone Directory: Must include on-site personnel, off-site management personnel, and developer personnel.

Full Set of Condominium Documents: This should include a quick reference guide for key elements such as the unit parameters, operating budget, architectural modification restrictions, unit owner ownership percentages, Board powers and restrictions, assessment collection, special assessment procedures, leasing restrictions and regulations, etc.

Additional Information: The developer also has a building manual that includes details regarding the building’s structual and physical assets. This will include warranty, maintenance, and product data for the community’s chiller or cooling tower, fire alarm system, HVAC controls, fire pump, irrigation, fire sprinklers, garage doors, lighting fixtures, emergency power generator, etc. This is not typically desired by unit owners but should be made available if asked for. As a reference manual, it best suits Board Members that are making the big financial decisions for the community.

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Buyer’s Notes: Condo Maintenance Fee Mayhem

Buyers in new construction condominiums get so caught up with the hype of the new building that they forget to read the condominium documents and budget and expect maintenance fees to remain at the same level that the developer provides during the onset. This can lead to a crisis for the individual unit owner. Maintenance fees can quickly soar to the level of rent pay for a sizable apartment. In some cases $900 and up per month on top of your mortgage payment. Almost every new construction project has their operational budget drafted by a management company or consultant well in advance of the building being topped off. This means that the budget might not reflect operational circumstances during occupancy.

The operational budget determines what the unit owner will pay in monthly maintenance. If the operational budget allocates $1,500 for electricity per month but the bill is actually coming in at $2,400 per month, then you can expect for there to be an amendment to the budget and increase in your maintenance. These increases can be substantial and come with little warning. There have been several instances where developers have had such poorly drafted budgets that they end up in a budget deficit when the project is completed. The resulting calamity leads to all the unit owners being required to pay for the budget deficit by special assessment. A special assessment is an unplanned maintenance payment aside from your regular maintenance assessment. In cases like this, a unit owner should request that an audit of the developer controlled association be completed prior to paying.

With foreclosures at record highs, many buyers with tight personal finances are planning on flipping or renting their unit. The problem is that if there is a special assessment or if maintenance fees get hiked, the buyer still has to pay and there will be no payment plan except what the Association determines. An unprepared buyer can quickly find themselves in a tight spot with their property at risk. Keep in mind, not paying maintenance means the Association can foreclose on your property, so having contingency funds set aside for probable maintenance increases and special assessments is the best way to protect yourself and home from loss. The Daily Business Review has an incredible article that further illustrates the problem with unpredictable maintenance costs.

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Buyer’s Notes: Deep vs. Shallow

Terraces are viewed as secondary to the unit interior. Buyers focus their attention on the bedrooms, master baths, kitchen, etc. Often times, when considering a unit’s value, the terrace is not even factored into the unit’s actual living area. The value potential of a terrace is often ignored. The problem is that many developments have shallow terraces. A shallow terrace is 5ft wide or less—more or less the width of a sidewalk. If you buy a unit, say on the 32nd floor of a high rise and your terrace is 5ft. wide, then there are limited things you can do with and on your terrace. You basically own a mid-air frighteningly narrow sidewalk on the side of the building. You might be able to place a measly couple of chairs; certainly not a table. Although many of your home’s guests won’t mind the shallow terrace, there will be many that will feel uncomfortable being out there, especially if you are high up. One doesn’t want to step out into the terrace and feel as if they’ll fall if they make a wrong move.

What people fail to recognize is that in a high rise a terrace can offer great potential to the unit owner if the terrace is deep. A deep terrace is 6ft in depth or more. Having a terrace on the 32nd floor that is 7ft in depth, for example, will allow the owner to place a small outdoor sofa or even a table. There are people who will place a jacuzzi in their deep terrace. When this is the case, the terrace is as much of a living area as the A/C cooled interior. It serves as a sort of spacious private observatory deck. Frankly, I like being as high up the tower as I can afford, but if I have to pick between a unit that is situated higher with a shallow terrace and a unit in another building that is lower but with a deep terrace, I might be compelled to pick the latter.

What if you want to do more than stand in your terrace? What if you want to walk around your outdoor chairs without squeezing against the railing? What if you want to sit down at a table and play dominoes while enjoying your beautiful view? If your terrace is shallow, then your ability to do any of these is hindered. There are hybrid terraces that are both deep and shallow. These are the best because they offer all the versatility of use that a deep terrace has and the roaming space that a long shallow terrace has. There aren’t many projects that have these types of terraces. They tend to be high end. Low rises often have poorly proportioned terraces. In this respect they are at a disadvantage to high rises.

Let us take a terrace from a unit at the Opera Tower and compare it to one from the a unit at Brickell’s Emerald Condo. The Opera Tower, which is significantly taller than the Emerald, features long but shallow terraces at 5ft in depth. They offer plenty of space to pace but not play. There isn’t sufficient room for a table and several chairs. Placing a table will block one’s access to the other side of the terrace not to mention make it look cluttered. The Emerald has deep terraces at 23ft. This allows ample space for outdoor furniture, plants, chairs, and damn it, even a jacuzzi if the condo docs permit it. Although the Opera Tower offers higher altitude units with more expansive views, the Emerald offers lower altitude units with more desirable and usable deep terraces.

Buying in a high rise is special because one has the opportunity to go vertical. In consideration of this, the terrace should be an important factor in the purchasing process. Deep terraces offer more uses and are more comfortable. Putting aside whether there are glass railings or steel, or if the terrace is wrap-around or straight, the depth of the terrace is the most crucial of the desirability factors. Having a deep terrace means having your own private and spacious observatory deck—a claim few can make in single family and low rise residences.

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Buyer’s Notes: Tall vs. Small

When considering a new condominium purchase, it is easy to get swayed in the direction of a high rise. You know, 30+ floor developments, because like the Jeffersons, you want to move up in to that deluxe apartment in the sky. The problem is that since you’re spending thousands of your hard earned dollars on this purchase, it is important to open your mind to all options. That means low rises have to be looked into.

There are certain unappealing perceived problems that low rises come with that are hard to ignore, for example, the loudness that accompanies being near street level. Drivers honk, sirens blare, city buses roar, and people chatter, especially in the city and beach. So, being high up in the air seems like a good idea. However, many low rise developers have risen to the challenge: hurricane impact resistant sound-proof glass. This high tech glass is not only quiet but as a safe as up-to-code shutter systems and is laid out elegantly in floor to ceiling form for most competitive loft projects. Low rise loft developments are no longer uncomfortably loud. Lack of privacy is another issue. Being close to the street means people might be able to look into your unit or see what you do on your terrace. For all you unruly folks, that means no lascivious or illegal activities can take place on your terrace. This issue is unavoidable and can only be remedied with tints or blinds. There are other problems, however. In a low rise, don’t expect on having a great view. This is hard to dispute in comparison to its high rise counterpart. Being 220 feet in the air tends to increase your chances of having a decent view. Being 45 feet above the ground poses a distinct disadvantage, but many low rise developments make up for their less than spectacular views by being ideally situated.

Location, after all, is the single most important factor in determining a property’s value. If you are well situated, an average city view will do just fine—especially if your building’s features are extraordinary and unit layout ingenious. Many low rise developments do just that; focus on both. As you would expect from a smaller scale project, there is a high degree of attention to detail; building materials, unit features and layouts, space concepts, technology, and building aesthetics. For a good example of this let us look at one South Beach low-rise development: West on Twelfth.

The Borges + Associates designed West on Twelfth low rise loft development has 29 units. The high-end low rise features a biometric finger print access system. Each unit features an interactive touch-screen panel that controls lighting, audio, surveillance, and climate control from anywhere in the world. This system is similar to the Related Group’s I.R.I.S. touch screen panel in 500 Brickell. The lobby is open air with 16 ft. high ceilings, translucent tinted glass panels shipped from England, and humidity absorbent stone floors. Standard units have 9’ 4’ft high ceilings. The penthouse has 18 ft. high ceilings. Penthouse units feature rooftop outdoor Roman tubs with independent gas grills. The master bathrooms are finished in marble and feature floor-to-ceiling glass walls. Furthermore, the unit kitchens feature state-of-the-art Sub-Zero and Bosch appliances. The building has the customary Zen garden and a unique rooftop pool. There is no concierge or valet on the property. The emphasis is on the unit furnishings and building features—no fluff. This also means that maintenance fees for the buyers will be more controllable. The project, as you would expect, is located exceptionally well—in the heart of South Beach within blocks of Lincoln Rd.

Low rises like Twelfth on West afford prospective buyers many details that high rise developments don’t. These features are unconventional and refreshing. High rise developers have a much higher construction cost and cannot afford to emphasize material quality as much as a lower density project—unless prices are hiked up significantly. Furthermore, a high rise development will usually have lower ceilings in order to accommodate a higher quantity of units. There is less control over maintenance hikes in high rises and association affairs tend to be much more complicated. For these reasons and more, low rises merit your attention.

The project is located on West Avenue and Twelfth Street on Miami Beach. Sales are being handled exclusively by Jeff Morr’s Majestic Group. Reservations just began. Prices start at $400k and go up to $700k.

Note: Touch screen and finger print access images are not actuals.

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