Business and Legal Insights

Due to widespread population growth, job creation and long-term rental demand, Florida continues to attract multifamily development. However, Florida’s regulatory framework, insurance environment and lender expectations can create unique risks that impact timelines and overall investment returns.

Awareness of the following issues can help first-time Florida multifamily developers avoid costly surprises:

1. Florida’s Land Use Codes are Highly Localized

Florida does not offer a uniform approach to zoning or entitlements. Density, height limits, parking requirements and design standards are controlled at the city or county level. As a result, projects often encounter unexpected hurdles when pursuing entitlements from local governments. In addition, the statewide Live Local Act can preempt certain local regulations to promote affordable housing. Some local governments are more supportive of the Live Local Act than others.

These entitlement risks also present financing issues. Lenders closely examine local zoning ordinances and approval timelines, which may cause delays or reduce loan proceeds. Engaging local counsel early can help identify entitlement risks and avoid these issues.

2. Insurance Typically Impacts Financing

Insurance costs in Florida are typically higher and more volatile than in other states. Rising premiums or unexpected coverage requirements can reduce debt service coverage ratios, trigger loan re-sizing or delay closings. Inexperienced developers, who wait until later in the underwriting process to address insurance issues, may find themselves renegotiating loan terms under pressure due to time constraints.

3. Lenders Impose Heightened Scrutiny on First-Time Borrowers

Lenders in Florida often impose stricter standards on first-time Florida multifamily developers. These include higher equity requirements, completion guaranties, liquidity covenants and key-man provisions. Out-of-state developers often partner with experienced Florida operators through joint ventures to improve financing terms. These arrangements require an understanding of Florida law and entity formation to address the proper control rights and exit provisions.

4. Florida-Specific Environmental Issues Can Cause Delays

Environmental conditions frequently present legal and financing challenges for first-time multifamily developers in Florida. Wetlands, protected species habitats and prior agricultural or industrial uses can trigger additional due diligence or permitting obligations. Lenders may also require Phase II environmental testing or related measures that impact cost and timing.

5. Lenders Shift Significant Risks to Developers

Florida’s construction loan documents allocate substantial risks to borrowers, typically around completion and delay. Personal completion guarantees are common for first-time developers, and “bad boy” carve-outs can create exposure well beyond initial investments.

Weather-related delays are another concern. Though force majeure provisions provide limited relief, loan documents may impose strict conditions for extensions, interest reserve usage and default remedies. First-time developers should focus on these weather-related provisions to avoid any related financing issues.

Conclusion

Florida is one of the most attractive multifamily development markets in the country, but it can be unforgiving for first-time developers who underestimate legal and financing risks. Engaging experienced Florida counsel early in the process can help first-time Florida multifamily developers structure transactions that anticipate these risks, align the legal and financing timelines, and protect long-term project value.

Shutts & Bowen’s Real Estate attorneys regularly advise multifamily developers throughout Florida, helping them navigate these issues before they become costly roadblocks.