A Miami condominium association has filed for bankruptcy, buried under tens of millions in debt.
Experts fear it could be a warning sign of what’s to come for other aging complexes across Florida.
When a homeowners association (HOA) collapses, the impact on residents is immediate and painful. Pools, gyms, and other shared amenities are shut down, landscaping is neglected, and basic maintenance stalls.
To make up for the financial shortfall, homeowners are often hit with steep special assessments — one-time charges aimed at balancing the books — while monthly dues can also surge as the HOA struggles to repay its debts.
In the meantime, property values will depreciate, and selling becomes far more difficult.
Some homeowners may attempt to replace the existing board or even dissolve the HOA entirely, leaving residents to manage common areas on their own or find costly alternatives.
It’s the latest sign of a broader condo reckoning in Florida, where runaway HOA fees, aging infrastructure, and poor financial planning have pushed many communities to the brink.
The situation has become so dire that Governor Ron DeSantis recently signed a law imposing sweeping reforms aimed at making HOA boards more transparent, accountable, and less intrusive.
Florida’s condos are in crisis with bankruptcy for some HOAs the only way out
David Podein, Equity Partner and Chair of the Real Estate and Transactional Law Group at Miami based Haber Law
Starting July 1, the law will rein in homeowners associations (HOAs) long accused of slapping residents with surprise fees and fines for petty infractions. It aims to prevent situations like the Sunset Palm Villas Condominium Association bankruptcy.
According to an online filing, the Sunset Palm Villas Condominium Association in Miami filed for Chapter 11 bankruptcy, listing debts of up to $50 million, while holding no more than $1 million in assets.
While the court documents don’t reveal exactly what triggered the financial collapse, experts say HOA bankruptcies usually stem from a toxic mix of problems: poor financial planning, underfunded reserves, emergency repairs, missed dues, and sometimes even fraud or embezzlement.
With many older condos now facing costly upgrades and new insurance mandates, bankrupt HOAs may become increasingly common — and financially devastating for owners caught in the fallout.
Ultimately it comes down to poor money management by members of the board and lack of transparency with residents.
David Podein, Equity Partner and Chair of the Real Estate and Transactional Law Group at Miami based Haber Law, has secured over $100 million in bank loans for condo associations to fund urgent improvements and avoid displacement.
He told DailyMail.com that following the Surfside collapse in 2021, some HOA boards woke up to the fact they needed serious change and took the proper steps to get up to code. But, many did not.
‘Some buildings are doing the necessary work. They’re going out and doing special assessments and their financing those special assessments with loans that allow the unit owners to repay the fond over a longer period of time,’ he said.
‘Others are not.’
There can be any number of factors that result in a lack of funds or reserves
Podein has been obtaining bank loans for condo associations to prevent bankruptcy and so they can realistically pay their special assessments over much longer period of time so it becomes much more affordable.
In the Sunset Palm Villas case, the filing was submitted on June 21 in US Bankruptcy Court in Miami and was made by property manager Julio Martinez.
The complex, built in 1958, consists of 267 units in several two-story buildings. The median home price in the development is $149,000.
The list of creditors after the HOA is exhaustive.
It includes multiple law firms, engineering companies, The United States Internal Revenue Service, Miami-Dade County’s Department of Regulatory and Economic Resources, Miami-Dade County Tax Collector, Miami-Dade County Water & Sewer Department, The United States Attorney General, and more
The exact amounts owed to each were not disclosed.
Now, under Chapter 11, the HOA can continue to operate — but decisions must now be court-approved.
Under the court’s supervision, a repayment plan will be drafted and enforced, which is going to trickle down to the homeowners.
f they suspect their funds were mismanaged, homeowners may have legal grounds to sue board members for negligence or breach of fiduciary duty
The homeowners in the community will now be held accountable for a portion of the debts of the HOA, and the HOA may seek to recoup its losses through special assessments, which homeowners are legally obligated to pay.
If they refuse to or can’t afford to, the HOA may pursue collections or even liquidate personal property to pay down debts.
Homeowners can take a few steps before things reach that level — but they need to team up and hire an attorney who specializes in HOA and condominium law.
Next, if they suspect their funds were mismanaged, homeowners may have legal grounds to sue board members for negligence or breach of fiduciary duty.
This also includes suing board members for failing to attend meetings, making self-serving decisions, or financial incompetence.
Transparency is key for all HOA boards, Podein stressed.
He advises boards to plan strategically, budget wisely, and communicate openly with residents.
Keeping adequate reserves and staying within the community’s means can keep financial disaster at bay.
The condo market has been especially fragile due to rising homeowner’s association fees, costs to upkeep the property, and tough new building laws
A well-run HOA doesn’t need to fear bankruptcy because the board is honest, he said.
‘Boards need to be open and honest with the homeowners,’ he said.
‘If they put off funding reserves they put off funding repairs for the building for years and years and the more you put off these projects, they become much more expensive because it becomes such a bigger project.’
Meanwhile, condo prices in Florida have hit rock bottom, with homeowners desperate to sell amid all the problems, like expensive HOA fees and stubborn mortgage rates.
Realtors predict that right now may actually be a good time to buy a condo in the Sunshine State.
As inventory continues to rise and prices cool, real estate agency Compass agrees, releasing a report that says ‘now is the perfect time to buy a home in Florida.’
Especially because this housing market won’t last forever.
Compass also urged buyers to explore Vero Beach and Sebastian, specifically.
Florida realtor Lance Willard sold a two-bedroom, two-bathroom condo last month for $155,000 in Palm Harbor.
‘In my opinion, it’s always time to buy if you can afford it,’ he tells the Daily Mail. ‘If you understand the market conditions and potential future pitfalls, you should buy.’
