Property Values Are Up. So What About Taxes?

 By Roger Williams

County governments in Florida should see record jumps in the taxes they’ll collect after the hot–market months of 2021 – those property sales will set 2022 value.

FORT MYERS, Fla. – This year turns out to be extraordinary for tax collectors in the Sunshine State because county governments are going to see record jumps in the booty – or bounty, if you will – they’re able to collect after the hot–market months of 2021.

“We are looking at sales occurring in 2021 to set 2022 value,” explains Dorothy Jacks, Palm Beach County’s property appraiser, who points to jumps of 15% in taxable values in the county. That’s a sizeable windfall for county commissioners who determine how much money they’ll need or want in a new budget, and then set millage rates, taxing property owners, to reach it.

“So even though it’s August now,” Ms. Jacks said as that month came to an end, “TRIM notices are based on numbers that occurred in 2021. We have the first half of 2022 to prepare these values, and in August they disclose them to all homeowners.”

It’s not just Palm Beach County, either.

One of the biggest jumps in property values happened in Collier County, where the Just value – that’s the value of a property before any assessments are figured or extra fees are paid if it’s bought and sold – jumped almost 42%, from $131 billion or so in 2021 to $185.6 billion now.

Property Appraiser Abe Skinner, born and raised one county to the north, has served at the Collier County office for 60 years, with a four–year break to run his own business when Haydon Burns and Claude Roy Kirk Jr. were governors in the 1960s, and he was still young.

Mr. Skinner may know everything there is to know about appraising property on the southern Gulf Coast, and until now he may well have thought he’d seen it all.

But maybe not.

“This year was very different – everybody and his brother wants to come to Florida, and they’re paying the price,” he said. “In certain neighborhoods here where you wouldn’t think properties might sell for more than $200,000 or $300,000, they might have sold for $700,000 or $800,000. It shows what’s going on in Collier. The first three quarters of the past year we were appraising many properties that were gradually climbing. And in the fourth quarter it just went crazy.”

After all exemptions have been applied, so far, the taxable value of property in Collier is coming in at about $122.3 billion.

In Lee and Charlotte Counties, too, the word “windfall” for local governments doesn’t seem out of place.

Property countywide is up between 15% and 20% in taxable value, and much more than that in the Just value – in the mid– to upper 30 percentage points – for the first time in more than 15 years, said Paul Polk, Charlotte County’s property appraiser.

“Our Just value, the market value before any exemptions or caps are applied, puts us at $41 billion – that’s an increase of 37%. It was $29.6 billion in 2021,” he noted.

Mr. Polk describes an annual process that takes place in every county.

“In July, the budget director meets before the board, which decides whether they’re going to raise the budget or keep it the same. That means they can lower the millage rate, keep it the same, or raise it.”

With the big jump in taxable value, commissioners could actually reduce tax rates on individual properties and hit the same budget numbers as last year.

“So we had a 17% increase or $3.5 billion in taxable value they were not looking at last year,” Mr. Polk said. “In the initial hearing, they said they would keep the millage rate the same. So they’re going to get more money. They have that option.”

But those figures are not yet set in stone, in any county. Public hearings to determine finally what millage rates to establish, mentioned in TRIM notices, are taking place this week.

Meanwhile, says Ms. Jacks, “each taxing authority sets its own millage rate – and there are 12 or 15 taxing authorities, each with taxing power. They’re looking at, ‘We need X–dollars to run this city or county, or this organization (school boards, mosquito control districts and the like), and they set a rate based on how much value they have to work with.”

How it’s computed

Grim, TRIM and not so slim is how many people these days may view the mail arriving from their county governments in the season we can never seem to escape: Property tax season.

Even hurricanes aren’t annual seasonal occurrences in Florida, which brings to mind an observation first made by Benjamin Franklin in a letter to a French scientist: “The only two certainties in life are Death and Taxes,” he wrote in 1789.

If you’re still breathing this year and you own residential, commercial or agricultural property in any of Florida’s 67 counties, the bill is coming due. August TRIM notices have arrived for property owners: TRIM, an acronym for Truth in Millage.

The millage rate is how much money per thousand dollars of property value elected leaders are going to tax property owners. But those with exemptions – residential homestead exemptions of $25,000 and a few others – won’t pay on the full value of their properties.

What any property owner should know: The tax bill you receive now is for last year’s assessments. Expect to pay more if your property jumped in Assessed value in 2021, as many properties did in a market not just hot, but boiling, for the late months of last year.

And expect to pay a lot more than those with multiyear homestead exemptions if you bought a different home or built a new home anytime after Jan. 1, 2021.

On the other hand, if you remained in a home with a homestead exemption from a previous year (a thing created for all Floridians by former Lee County Property Appraiser Ken Wilkinson), you’re in luck.

Homestead exemptions also restrict jumps in property tax to no more than 3% a year. Other property owners, those without homestead exemptions, are capped at a 10% per year increase.

So here’s a hypothetical: If you bought a home and property for $300,000 in 2011 that you still own, receiving the homestead exemption on it that year and paying $750 in property tax in 2012, your taxes could increase at no more than 3% each year.

The most you could pay this year, therefore – even if your home increased in value from $300,000 to $1 million or more – would be just over $1,000.

But if you sold your home for $1 million in 2021, the new owner could establish a homestead exemption, but he or she would be paying a tax on the new Assessed value.

The various values

It’s not too complicated, but it is both detailed and structured. First, the market value of your home, vacant lot or other property – what you might actually sell it for – is never a direct part of property taxing.

But the so–called market value determined in part by the sales prices of similar or nearby properties, also helps determine what Just value, Assessed value and Taxable values property appraisers will put on your property, explains Matt Caldwell, Lee County’s property appraiser.

“Just value is like the market value you see on a private house, but there’s a difference: the Just value has to reflect pure cash. The commissions you pay for the sale have to be deducted, so your Just value should be lower than your market value.”

But your property tax isn’t based on that.

“From the Just value you step down to Assessed value,” Mr. Caldwell explained, “And that includes your caps: the 3% for the homestead or 10% for other.” There are a host of additional exemptions, too – for widows, for example.

And after assessing all of that, property appraisers determine the taxable value actually reflected in your slim, grim, TRIM notice.

“So in Lee County, the Just value went up 35%, the Assessed value is up 18%, and the Taxable value went up more than 15%,” Mr. Caldwell said.

In Lee, “of the 550,000 properties, about half are homestead properties, so they’re capped at 3%. The only people who will pay more than 10% are people who bought brand new in 2021 or did brand new construction. They’re starting at the top of the benefit ladder.”

In Charlotte County, Mr. Polk said, “we have over 200,000 properties we have to value each year, and we’re required to evaluate starting Jan. 1 each year.

“We’re going into neighborhoods, looking at sales. We have vacant lots that were selling in January 2021, for $10,000. By the end of the year they were selling for $25,000. Markets more than doubled. There’s been no jump like than in 15 years. And 17% is big because we have the homestead cap of 3%, and 65,000 or 70,000 homes with homestead only went up 3%.”

With commercial rather than residential property, however, “we’re using more of an income approach,” Ms. Jacks explained. “So think about an office tower or strip center – we’re looking at data of rents in a property doing that, along with other things, such as the actual cost of doing business.

“One of the things about our work, by its nature because we’re doing it in mass, is that it’s done with a broad brush. We’re not looking at individual properties one by one.”

What to do with all the money

In the eyes of county commissioners determining county budgets, the big 2021 boost is not likely to mean spending like there’s no tomorrow, especially since taxpayers tend to pay attention and take it personally if they feel they’ve been stung by unnecessary spending.

But it may mean some catch–up spending, both in infrastructure and on human capital.

“My view is we have to spend on infrastructure, not just road ways but sewer and water, and we have to support our people,” explained Kevin Ruane, a Lee County commissioner and former mayor of Sanibel Island, who has spent a professional career in finance.

“The county has more than 800,000 residents, and there are 18 additional budget requests we have to consider for our budget.

“The biggest, 42% of our budget, goes to the Sheriff’s Office. The biggest pieces are for capital improvements, but the Sheriff’s budget alone cost us $25 million for personnel.”

And personnel are key.

“The pendulum has to swing both ways,” Mr. Ruane said. “During the recession there were seven years of no raises. So this year the county did an adjustment: at the low end, raises are 10%. At the upper end, it’s 3%, for a 7.8% increase overall in salaries.

“If we want to be the county of choice when there’s not enough labor, how do you do that? You take care of people. So we were proactive.”

In Collier County, eight–year commissioner Penny Taylor echoed some of Commissioner Ruane’s thoughts.

“What are we going to do with the money? Well, we anticipated this a little, budgeting for around a 6% increase, and it went up to almost 16% – and we’re already spending it,” she said.

“The sheriff came to us at our budget meeting and said in order to keep the deputies here and on the job, he’d need $4 million to implement a new pay plan.”

The commissioners gave it to him in their budget planning. There’s a reason for that, Ms. Taylor said: “The private sector is paying more than the government sector and we’re losing folks.

“So the money will go for public safety, for storm water operations and maintenance, and for transportation.”

Before the current high times – which appear to be settling down as markets become more steady – Florida residents in Collier County saw property values increase by 26% in 2006, as the markets boomed. In 2007, Ms. Taylor recalled, that increase dropped to 16%, and then 2008 arrived.

The world seemed to turn upside down for many, and so did property values, which plunged.

“We didn’t climb out of the recession until 2013,” Ms. Taylor recalled.

While that may be the big picture, when TRIM notices arrive in mailboxes as they have in recent days, they aren’t absolutes. They can be challenged in any county, Mr. Caldwell explained.

“If a property owner gets a TRIM notice and has a question, they can go on line, chat or come into the office. I have 82 people, but the 20 or 25 who deal with these issues have heard it and seen it all, and they’re extremely helpful, on the phone or in person.”

Homeowners have 25 days after receiving a TRIM notice to file a petition to have it changed.

“If you feel strongly we got your number wrong, reach out and let’s talk,” Mr. Caldwell said. “Is there something we missed? Maybe we said you have three bathrooms but you only have two. If it’s issues of opinion, talk to us. We resolve a lot of questions that way.”

Last year, he noted, the county had 550,000 real estate parcels and after the August TRIM notices went out, only about 2,000 petitions for a change in values.

And if talking won’t work and an owner doesn’t like a resolution, “we can go to court. We had a dozen go to court last year.”

Meanwhile, come Jan. 1, property appraisers will have eight months again to tally the data from an astoundingly vigorous 2022 before sending out next year’s TRIM notices.

Although the market in the first six months was still a boil, it now seems now to be calming a bit.

What will those notices a year from now look like?

“We still have five months to go, and properties are staying on the market for a little longer now, and that tells us the market is starting to simmer, to relax a bit, to go back to a more normal market,” Ms. Jacks said.

“That may mean that although we will see increasing values next year, they may not be at this level.”

© Copyright 2022 Florida Weekly, Fort Myers Florida Weekly. All rights reserved.

Rising Interest Rates Weigh on U.S. Home Values

Black Knight: Home prices fell 0.77% between June and July – the largest monthly decline since Jan. 2011 and the first monthly drop of any size in 32 months.

NEW YORK – According to a recent Black Knight report, house prices fell 0.77% between June and July, marking the largest monthly decline since January 2011 and the first monthly drop of any size in 32 months.

As mortgage rates continue to rise and weigh on home values, some homeowners have lost wealth. Mortgage rates are now double what they were at the start of this year, and home sales have slowed.

However, Ben Graboske, president of Black Knight Data & Analytics, says, “Annual home price appreciation still came in at over 14%, but in a market characterized by as much volatility and rapid change as today’s, such backward-looking metrics can be misleading as they can mask more current, pressing realities.”

Roughly 85% of major markets have seen prices come off peaks through July, with one-third coming down more than 1% and about 1 in 10 falling by 4% or more, according to the report. As a result, after gaining trillions of dollars in home equity collectively during the first two years of the COVID-19 pandemic, some homeowners are now losing equity.

Declining home values in June and July brought the total amount of tappable equity down 5%, and Black Knight analysts expect the third quarter will show a larger decline.

The report also indicates that about 275,000 borrowers who would fall underwater if their homes were to lose 5% of their current value, but even with a universal 15% decline in prices, negative equity rates would still be nowhere near the levels seen during the financial crisis.

Source: CNBC (09/07/22) Olick, Diana

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688

Florida Homeowners’ Insurance Surcharges Coming

 By Sam Sachs

As insurance providers in Florida leave the market and some companies fold, residents themselves are footing the bill from companies pulling out of the state.

TAMPA, Fla. – Florida homeowners will see their bills go up as the state’s property insurance crisis continues. Multiple insurance providers in the state have left the market, even after a special legislative session was held to address business and homeowner needs. Now, residents themselves are footing the bill from companies pulling out of Florida.

In August, another insurance company was added to the list of providers that became insolvent, the 10th since April 2021. The Florida Insurance Guaranty Association is the state-created non-profit, which “establishes and maintains a service-oriented operation for processing covered claims of insolvent members.” FIGA was established by the Legislature in 1970.

For the second time in 2022, FIGA has issued a surcharge to homeowners on their insurance policy premiums, in order to cover claims from companies that have entered receivership. It’s the third time this has happened since 2020, according to FIGA. So far in 2022, FIGA assessments have approved surcharges to go up a collective 2%, with 1.3% added in March and another 0.7% added in August.

The 0.7% increase was approved on Aug. 19 after the Florida Office of Insurance Regulation ordered a levy.

Citing Florida statutes, FIGA said “members will be able to recoup the .70% assessment from their policyholders over the Assessment Year starting January 1, 2023, through December 31, 2023.”

According to the request for new levy by OIR, “the liquidation of Southern Fidelity Insurance company resulted in FIGA receiving in excess of 5,000 claims with unpaid losses and return premium in excess of $178 million.”

FIGA reported to OIR that their forecasted cash flow would be “materially impacted” by the insolvency of Southern Fidelity. Thus, the non-profit said they need the collection of surcharges to continue into 2023. The letter from FIGA to OIR said the surcharge collections will “result in approximately $168 million in assessments for FIGA policies” through Dec. 31, 2023.

The insolvencies across Florida’s property insurance companies comes amid a potential downgrade to company ratings for 17 providers, which was only delayed, not withdrawn, and the possibility of homeowners being on the hook if their companies are downgraded or fully fail.

While Florida has instituted a temporary fix for the Demotech ratings downgrade, another insurance company is weighing an exit from the state as well. Demotech’s president Joe Petrelli told WFLA.com that the downgrades were delayed “until further notice,” after pressure from Florida’s government. However, The state insurance commissioner, David Altmaier, has also put nearly 30 insurers on a watch list, according to previous reporting by WFLA.

At the end of July, OIR announced a temporary reinsurance arrangement with Citizens Property Insurance Corporation while the ratings downgrade was weighed. The solution, according to OIR, would “allow insurers to meet an exception offered by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation,” letting Floridians keep their homeowners coverage during hurricane season.

“OIR’s greatest priority is ensuring consumers have access to insurance, especially during hurricane season; and because of the uncertainty with the status of Demotech’s ratings, we've been forced to take extraordinary steps to protect millions of consumers,” Altmaier said in July.

Altmaier said the quick fix was an “innovative arrangement” that would let consumers keep coverage while allowing insurance agents to avoid moving policies, which would let lenders “have confidence that these insurers continue to meet mortgage qualifications.”

According to American Family Insurance, a national insurance company, property insurance is not technically, legally required for homes that are fully owned and no longer subject to mortgage payments, which are a loan. If a resident owns their home outright, there is no lender requiring payment, and thus, the insurance itself is optional. Many mortgage lenders do require insurance policies.

As of July, more than 30% of homes sold in Florida were paid for in cash, meaning there is no mortgage policy attached to them.

Bankrate, a consumer financial service company, says many insurance policies use a type of coverage known as replacement cost to calculate the monthly and yearly rates for coverage plans used by homeowners. However, the replacement cost refers to the cost to replace or rebuild a home that becomes damaged.

During the ongoing inflation issues facing the national and global economy, the prices of materials, a skilled labor shortage, and other supply chain problems have increased the costs for construction and repair. This has resulted in policy premiums increasing.

The median sell price for Florida homes was $412,303, according to Florida Realtors. This means that if you have a mortgage, your replacement cost, depending on the type of insurance plan you have, would cover about what you paid to purchase the home.

To handle the failing insurance companies, the assessment levies from FIGA have added the surcharges to fund payments to insurance claims filed by those losing the policies from the folded insurers.

While the total assessment for levies was increased a collective 2%, in 2020, the Florida Legislature allowed a potential for bigger increases due to emergency needs. “Emergency Assessments were increased from 2% to 4% annually during the 2020 legislative session,” according to FIGA. Before 2015, insurance companies paid assessment fees to FIGA, then added a surcharge to each policy until the money spent was recouped.

FIGA said in 2015, the assessment statute was amended by the Legislature to allow FIGA to “obtain funds quickly, but also introduced an option for insurers to remit assessments” when they’re collected over a yearlong policy term. From 2013 to 2020, no assessments were levied, according to information from FIGA.

Since 2020, assessments were levied three times.

But, even with the added levies and subsequent surcharges, FIGA reports that they will only cover up to $300,000 in claims costs. This means that, at least for median prices of homes sold in July, Florida residents won’t be able to get a full replacement cost recouped for themselves if they need to file a claim. Instead, they'll be shorted $112,000 on average, based on current market data.

The Florida Chief Financial Officer's office reports there are currently 15 companies in liquidation and receivership, with 11 of the companies property insurers.

By current policy choices, the costs of failing property insurance companies are now passed on to Florida residents, so a state-run insurance nonprofit can recoup the costs of paying out claims for the companies that have folded.

“A public workshop will be held on Sept. 21, 2022, by FIGA to provide members with information on how to report and remit surcharges collected for the 2022 Assessments,” according to the company.

Copyright © 2022 WFLA, Nexstar Broadcasting, Inc. All rights reserved.

HUD Announces 2023 Fair Market Rent Limits

 By Kerry Smith

HUD’s Secretary said higher FMR limits will expand housing opportunities. Based on location, Florida’s start at $623 for an efficiency and goes to $3,433 for 4 bedrooms.

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) published its Fair Market Rents (FMRs) for Fiscal Year 2023. FMRs, published annually, are an estimate of the amount of money that would cover gross rents (rent and utility expenses) on 40% of the rental housing units in an area. It’s the basis for other HUD calculations, such as Section 8 vouchers.

Nationally, HUD says FMRs will increase by an average of about 10%.

“One of the reasons that housing voucher holders are unable to use those vouchers is because the value of their vouchers has not kept up with rapid rent increases,” says HUD Secretary Marcia L. Fudge. “These new FMRs will make it easier for voucher holders … to access affordable housing in most housing markets, while expanding the range of housing opportunities available to households.”

Florida Fair Market Rents in 2023

HUD has posted a roster of nationwide FMRs broken down by state and, in many cases, metro area. To see a breakdown for Florida, visit HUD’s analysis and select “Florida” from the menu.

The chart further breaks down rentals by size, from efficiencies to four bedrooms. In Florida, the least expensive FMR ranges from $623 for an efficiency in Levy and Washington counties, up to $3,433 for a four-bedroom rental in Monroe County.

HUD is required by law to set FMRs every year. FMRs, which go into effect on Oct. 1, are used in several HUD programs, including to determine the maximum amount that a Housing Choice Voucher will cover.

© 2022 Florida Realtors®

U.S. Housing Market at a Crossroads

 By Terry Collins

Homes reached record prices in early 2022 – so is the current market a housing recession or just a market correction? Experts disagree and it’s too soon to know.

NEW YORK – A widening debate about where the U.S. housing market stands: Is it in a recession or a correction?

Experts are drawing various conclusions while looking at the same indicators on everything from the Federal Reserve’s hawkish stance on interest rates to the sentiment of homebuilders, real estate agents and buyers on their gut feelings on where the market is heading.

The multiple scenarios are reflective of the market’s imbalance, with new construction and existing-housing sales down compared with last year, while home prices remain high.

The housing market “is giving off a lot of mixed signals,” said Neda Navab, president of brokerage operations at real estate company Compass in New York. “If you’re a pessimist, you can find plenty to keep you up at night. If you’re an optimist, there are plenty of silver linings.”

That leads experts to guess about what’s ahead.

Is there a housing slowdown?

There is widespread consensus that the housing market has experienced a drastic drop-off in activity since its pandemic-prompted heights.

That slowdown will continue, with moderate price declines for about 18 months, said Greg Phillips, chief technology officer of Houwzer, a Philadelphia real estate startup. The housing market is “not like the volatile stock market, always going up and down; the housing market moves at a different, slower pace,” he said.

Compass’ Navab said millions of buyers “still want and need to purchase homes,” though some buyers are pulling back in the face of limited affordability, increased mortgage rates and overall economic uncertainty.

Buyers, sellers and real estate agents already are adjusting to the slowdown, said Navab, who notes that home sales prices, though lower, remain high. “The market simply could not, and was never expected to, grow at that pace indefinitely,” Navab said. “Whether this trend will continue long enough for the market to enter a true ‘recession,’ or if this is simply the start of an expected ‘correction’ to historic norms, still remains to be seen.”

However, Navab said that if the market does indeed stabilize at or near the current levels, “I would call that a ‘correction’ and not a ‘recession.’”

The case for a housing correction

Navab is hedging on a correction, citing the “the breakneck pace” of the housing market the past two years, including monthly sales regularly topping 6 million at an annualized rate and annual home price growth of 20% or more in many markets, was “both unprecedented and unsustainable.”

For example, Phillips noted that home prices in Philadelphia; Washington, D.C.; and the Florida cities of Jacksonville, Orlando, and Tampa-St. Petersburg are up as much as 20%.

Navab said the demographic drivers of housing demand powered the market largely due to “a robust millennial generation” that she feels will drive it for years. “Well-qualified buyers that can afford to be patient and or can adjust their budgets may find more negotiating room and supply than they’ve had in years,” Navab said. “Sellers that are disciplined on their price should still expect plenty of attention on their listings.”

David Goswick, a 30-year veteran of the housing industry, believes the housing market is simply in a correction. The co-founder of House X World, a Houston real estate brokerage, Goswick said the market has been “a runaway train” since the pandemic began. Now, with pricey new and resale homes, and new construction slowing, the market is readjusting.

He also thinks having a 90-day housing forecast now is “meaningless,” as the market should be looked at in real-time through seven-day trends.

The case for a housing recession

Robert Dietz, the chief economist for the National Association of Home Builders, makes the case that the U.S. housing market is in a recession, citing eight straight months of declining homeowner sentiment.

The trade group’s Housing Market Index, which rates the relative level of current and future single-family home sales, fell 6 points this month, to 49.

A score of 50 or above marks a favorable outlook on home sales; A score below 50 indicates a negative outlook. Dietz also said that single-family permits are down 4% in the first half of 2022, compared with the first half of 2021.

The National Association of Realtors agrees. The organization informally defines a housing recession as six months of straight decline in home sales. NAR Chief Economist Lawrence Yun said sales in July fell by nearly 6% compared with the previous month, equating to almost 5 million units, marking the slowest sales pace since November 2015 – with the exception of a drop occurring at the start of the COVID-19 pandemic two years ago.

Additionally, NAR said home sales, including single-family homes, townhomes, condominiums, and co-ops, fell about 20% compared with July 2021, when the housing market was scorching.

On the verge of a collapse?

No, the housing market is not even close to the housing market crash during the 2008 Great Recession, experts agree. That’s in part because of new lending regulations resulting from the meltdown.

Borrowers are in much better shape, with higher credit scores. And with home prices still up, homeowners have a record amount of equity.

“This is a pretty complicated web that’s happening right now, but it’s nothing like the crash in 2008 and 2009 that took years for the market to unwind,” said Phillips, of Houwzer.

Los Angeles real estate investment adviser André Stewart, CEO of InvestFar, a startup, believes Federal Reserve chair Jerome Powell is far from finished playing a key role in the housing market’s future.

“The Fed also has a $2.7 trillion mortgage dilemma, combined with high-interest rates, it’s very unlikely the Federal Reserve can unwind its balance sheet,” Stewart said. “But if they do, prepare for a collapse, not a correction, in housing over the next 18 to 24 months.”

Copyright 2022, USATODAY.com, USA TODAY

Judge Tosses Challenge to Part of Insurance Law

 By Jim Saunders

Contractors challenged an assignment of benefits (AOB) change passed in May by the Florida Legislature, but the judge said people named aren’t “proper defendants.”

TALLAHASSEE, Florida – A Leon County circuit judge has rejected a challenge by contractors to part of a new property-insurance law that restricted attorney fees in insurance disputes.

Judge J. Lee Marsh issued an order Monday dismissing a constitutional challenge filed in May by the Restoration Association of Florida and Air Quality Assessors, LLC, an Orlando firm that does work such as mold testing and leak detection.

The challenge targeted part of a law passed during a May special legislative session that Gov. Ron DeSantis called to address massive problems in Florida’s property-insurance market. The lawsuit named as defendants Melanie Griffin, secretary of the Florida Department of Business and Professional Regulation, and Donald Shaw, executive director of the state Construction Industry Licensing Board, because they have disciplinary and regulatory authority over contractors.

Marsh’s order did not directly address the constitutionality of the law but dismissed the case because he said Griffin and Shaw were not “proper defendants,” in part because they were not in charge of enforcing the law.

The insurance industry has long blamed litigation and attorney fees for driving up costs. The new law took a series of steps to try to address those issues, but this court challenge focused on part of the measure that deals with “assignment of benefits” (AOB).

In assignment of benefits, homeowners sign over their insurance claims to contractors, who then seek payment from insurance companies – often spurring lawsuits about claims and payments.

In the past, contractors could recover their attorney fees from insurers if they were successful in the lawsuits, a concept known as “prevailing party fees.” But the new law (SB 2-D) stopped contractors from being able to recover prevailing-party fees if AOB. Homeowners can still recover prevailing-party fees if they file lawsuits directly, but contractors cannot.

The lawsuit alleged that the change violates equal-protection and due-process rights and denies contractors access to courts.

“When the insurer delays, underpays or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed,” attorneys for the Restoration Association of Florida and Air Quality Assessors wrote in an Aug. 4 response to the state’s motion to dismiss the case. “Without the corresponding right to recover attorneys’ fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court, and thus effectively voids the AOB (assignment of benefits), leaving the assignee (the contractor) holding the bag.”

But in seeking a dismissal, the state’s attorneys focused on issues such as whether Griffin and Shaw were proper defendants. In the July 13 motion to dismiss, for example, the attorneys wrote that the law “does not charge the secretary or the executive director with enforcing its provisions” and does not implicate their “specific responsibilities.”

“In other words, do the secretary or executive director have specific responsibilities relating to property insurance or awarding attorney’s fees in insurance litigation? They clearly do not,” the state’s attorneys wrote.

As an indication of the interest in the lawsuit, state-backed Citizens Property Insurance Corp., Security First Insurance Co., Tower Hill Signature Insurance Co. and US Coastal Property & Casualty Insurance Co. formally intervened to help defend the law.

The Restoration Association of Florida and Florida Premier Roofing LLC also have a challenge pending in Leon County circuit court to another law (SB 4-D) passed during the special session.

Florida’s property-insurance market has been in upheaval as insurers have dropped customers and sought huge rate increases because of financial losses. Five property insurers have been declared insolvent since February, and policies have poured into Citizens, which was created by the state as an insurer of last resort.

© 2022 The News Service of Florida. All rights reserved.

Vacation Home Market with the Best Returns on Investment? Greater Miami

 By Veronika Bondarenko

The U.S. has 1.1 million vacation rental properties and while investors seeking top returns often focus on tourist destinations, some smaller unexpected cities also work.

NEW YORK – While the old adage about location and real estate may be changing for those who work remotely, it has never been more true for those who rent out vacation properties – a home steps from South Beach or a West Hollywood condo can bring in hundreds of thousands of dollars a year as a rental.

That is, of course, the top end of the range. There are, at the moment, over 1.1 million vacation properties being rented out across the U.S, and for many it is a steady but modest source of supplementary income.

A recent study by rental research company AirDNA found that, at the end of 2021, an average vacation home generated $56,000 a year in profit after all expenses.

But in terms of where it is best to invest, a recent round-up by LawnStarter found that Miami was by far the most profitable city to own a vacation home. Out of the 190 biggest markets in the country, it had the best ratio of ROI (return on investment), the initial investment needed to obtain a place.

Where should I buy vacation property?

Despite the fact that rentals of less than 30 days are not permitted in the city, New York still ranked as the highest most profitable place in the country to be in this business. Due to a decades-long shortage of both long-term and short-term housing, a place that’s put up for two or three months will still get snapped up very fast.

Six out of the top ten cities on the list were in the South.

“Although they aren’t your typical vacation hotspots, nightly rates are competitive here,” the study’s authors write. “Host expenses in Augusta are particularly low, putting more money back in your pocket, but Tampa and Knoxville are relatively safer for tourists.”

California, meanwhile, filled out the bottom of the list with seven of the spots. But while Los Angeles was relatively high at 24 out of 190, Fremont, Sunnyvale, and San Jose were the three worst cities to rent out a vacation home in the country.

What’s the ROI (and what will I have to spend)?

Reasons for this range from everything from being suburban and too far away from any tourist destinations to, in the case of San Jose, low safety ratings.

Many of the cities to place at the bottom of the round-up also ranked low in the number of attractions. While New York, Los Angeles, and Chicago predictably topped in that regard, California’s Modesto and San Bernardino had the lowest.

“Invest in a property within Miami, Boston, New Orleans, and Los Angeles, and you’d be almost guaranteed to see money roll in,” reads the study. “Many tourists imagine staying in a seaside (or near-water) retreat for their holidays, so it’s no surprise that these cities would haul in the biggest returns from their short-term lets.”

Texas’s Irving and California’s Lancaster had the highest average housekeeping costs, while Cleveland in Ohio and Bridgeport in Connecticut had the lowest. Rental occupancy rates were highest in Garland, Texas, and Fresno, California, while Lakewood in Colorado and Garden Grove in California had the largest number of empty vacation listings.

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