TALLAHASSEE — Thousands of condominium owners could face hefty increases in their association fees under a bill that advanced in the Florida House Thursday that would impose strict new financial requirements to pay for structural repairs.
The bill, PCB PPE 22-03, is similar to proposals moving through the Senate and, because it has the support of House and Senate leadership, is expected to become law. It was passed unanimously Thursday by the House Pandemic and Public Emergencies Committee.
“This is a bill that is long overdue,” Rep. Danny Perez, a Miami Republican who is shepherding the bill through the House.
He said legislators were motivated to tighten the state’s condo association rules after the collapse of Champlain Towers South in Surfside that killed 98 people. “It’s something that I don’t want any family to ever go through again.”
The goal of the proposal is to not only increase financial and inspection requirements but to make the information a public record to allow new home buyers, existing homeowners and public officials to keep the condo associations accountable, he said.
“We have made some changes for transparency so that there is no hiding the ball on what potential problems, what potential solutions are going to be done to a specific condominium,” Perez said.
10-year reserve study
Under the proposal, condominium associations would be required to conduct reserve studies every decade to make sure they have the resources to finance needed structural improvements. They also would be barred from waiving a requirement that they put money in reserve to make structural improvements, although they could continue to waive collecting reserve funds for other improvements.
The bill also requires that condos would have to be recertified after 30 years if they are three stories or higher, or are 25 years old and within three miles of the coast. Every 10 years after that, they must be recertified again.
If the inspection reveals “substantial damage to certain structural or life-safety systems,” the proposal requires an additional, more intensive inspection, called a “phase 2″ inspection. The repairs would have to adhere to a time schedule advised by the architect or engineer that does the inspection.
Enforcement will happen primarily at the local level, with counties deciding what sanctions should be involved for failure to conduct reserve studies or inspection requirements.
After the phase 2 inspection report is received by the county, the repairs must begin within one year. And if a condo association fails to begin or schedule the required repairs within a time period set by the county commissioners, the local building official can condemn the building as unsafe for human occupancy until work on such repairs is started.
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The proposal was commended as a good start by the Florida Engineering Society, which recommended the increased inspection schedule.
But Will Simons, president of Association Reserves, which does reserve studies for community associations across the country, said that while the bill makes important changes to Florida law, it doesn’t go far enough.
He said his company has completed over 70,000 reserve studies for community association clients across all 50 states and prepared the one and only reserve study in 2020 for Champlain Towers South before the building collapsed last year.
“We were part of the team of experts that tried to sound the alarm about what was going on in that property but, as we all now know, that message was received too late,” he said.
The assessment facing condo owners at Champlain Towers South for its 40-year recertification exceeded $15 million. After postponing major repairs amid bickering over costs, owners were hit with massive individual special assessments.
Simons said that Champlain Tower South “was a financial disaster long before it was a physical disaster,” and too many condo associations in Florida also face challenging financial stability.
“Over the course of their 40-year history, maybe if they had spent a little bit more time and attention in diagnosing conditions, looking at existing problems that were known a long time ago, maybe they would have had a different outcome,” Simons told reporters after the meeting.
Perez said the goal of the new regulations is to end that procrastination and make sure that condo associations “are taking care of their needs and their necessities for their condo owners” and are “held accountable.”
But, Simons warned, the proposed 10-year requirement for a reserve study is “not nearly enough” and Florida should adopt a more frequent timeline.
“The best practice in our industry is for associations to conduct a formal study, including a new physical inspection of the subject property no less than every three years,” Simons said. “Waiting 10 years between updates will allow associations to drift off course financially, only to find out much too late that what they’ve been doing has not been enough.”
He also criticized the requirement that only licensed architects or engineers be allowed to conduct reserve studies.
“A licensed architect or engineer may have the skills to perform a structural analysis, but that’s not the same as the budgeting and cash-flow skill set, a combination of building sciences and finance to prepare reserve studies,” he said.
And Simons said the legislation should not designate a “one-size-fits-all checklist” for inspections and reserve requirements.
“Most condo associations will never experience the types of structural problems that occurred to Champlain Towers itself, but that’s only if they take the steps along the way,” he warned. “To properly care for their buildings, boards of directors can learn how to do this by doing regular reserve studies.”
Perez said he is prepared for the possibility that the more intensive inspections and reserve requirements may be too much for some condo owners to afford.
“This is going to be a financial lift for condominiums that have not been keeping up with their buildings the way that they should have,” Perez said.
For that reason, he said, the bill gives associations until 2024 to complete their reserve studies and then another two years to accumulate enough finances to pay for the repairs.
But the measure also allows for condo associations to put the entire building on the market and terminate the association if the cost of repairs identified in a phase 2 inspection is more than 65 percent of the total fair market value of the units in the association.
List of regulations
The bill also requires:
- Studies: Requires condominiums and cooperatives to conduct studies every 10 years to indicate how adequate their financial reserves are to accommodate their need for building improvements. Requires developers to complete reserve studies prior to turning over a condo association to the unit owners.
- Reserves: Condos will no longer be allowed to pool reserve funds, and funds must be intended for structural improvements.
- Notice: Local building officials must provide written notice to associations when buildings must be recertified.
- Disclosure: Requires recertification and phase 2 reports be submitted to building officials, unit owners and potential buyers of a condo unit. Reserve studies also must be provided to a potential condo buyer.
- Penalties: Gives local building officials the ability to assess penalties against condo associations for failing to comply with the requirements for building recertifications and phase 2 inspections.
- Waivers: Reverses current law and prohibits condo associations from waiving reserves.
- Inspections: Inspections must be performed by licensed engineers or architects.
- Enforcement: The Florida Department of Business and Professional Regulation is authorized to enforce the reserve studies and recertification inspection requirements.
Absent from the bill, however, is any provision that will help condo associations obtain financing to pay for needed structural repairs.
Simons estimates that there are thousands of the almost 30,000 condo associations in Florida that face challenging financial situations because they have pushed the obligation of financing repairs “down the road for the next group of owners.”
“What we know for sure is that the majority of associations are not doing anywhere near enough to fund their reserves or to provide in some way for their major responsibilities,” he told reporters.
“So whether that’s a combination of reserves or loans or lines of credit, I think what people need to recognize is that the true cost of ownership and living in a condo building has to include some form of reinvestment in the property.”
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