Florida bill would require condo owners to perform inspections, except for repairs

TALLAHASSEE — Thousands of condominium owners could face steep increases in their association fees under a bill introduced Thursday at the Florida House that would impose tough new financial requirements to pay for structural repairs.

The law project, PCB PPE 22-03, is similar to proposals that pass through the Senate and, because it has the support of House and Senate leaders, is expected to become law. It was passed unanimously Thursday by the House Pandemic and Public Emergencies Committee.

“This is a long overdue bill,” said Rep. Danny Perez, a Republican from Miami who is pushing the bill through the House.

He said lawmakers were motivated to tighten rules for the state’s condo association after the collapse of Champlain Towers South in Surfside killed 98 people. “It’s something I never want a family to go through again.”

The goal of the proposal is not only to increase financial and inspection requirements, but to make the information a public record to allow new homebuyers, existing owners and officials to hold condo associations responsible, he said.

“We’ve made some changes for more transparency so there’s no hiding of potential issues, potential fixes that are going to be made to a specific condominium,” Perez said.

10-year reserve study

According to the proposal, condominium associations would be required to conduct reserve studies every ten years to ensure that they have the resources to finance the necessary structural improvements. They would also be prohibited from waiving the requirement to set aside money for structural improvements, although they could continue to waive the raising of reserve funds for other improvements.

The bill also requires condos to be recertified after 30 years if they have three or more stories, or if they 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 “significant damage to certain structural or life safety systems”, the proposal calls for an additional, more intensive inspection, called a “Phase 2” inspection. Repairs should follow a schedule advised by the architect or engineer performing the inspection.

Enforcement will be primarily at the local level, with counties deciding what penalties to incur for failure to complete reserve studies or inspection requirements.

Once the Phase 2 inspection report is received by the county, repairs must begin within one year. And if a condo association fails to begin or schedule required repairs within a time frame set by county commissioners, the local building official can condemn the building as unsafe for human occupancy until the work is complete. on these repairs are started.

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The proposal was hailed as a good start by the Florida Engineering Society, which recommended increasing the inspection schedule.

But Will Simons, president of Association Reserves, which reserves studies for community associations across the country, said while the bill makes significant changes to Florida law, it doesn’t go far enough.

He said his company completed more than 70,000 reserve studies for community association clients in 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 who tried to raise the alarm about what was happening at this property but, as we all know by now, this message was received too late,” he said. -he declares.

The balance sheet faced by the co-owners of the Tours Champlain Sud for its 40-year recertification exceeded $15 million. After postponing major repairs amid wrangling over costs, owners have been hit with massive individual special assessments.

Financial disasters

Simons said Champlain Tower South “was a financial disaster long before it was a physical disaster,” and too many condo associations in Florida are also facing difficult financial stability.

“Over their 40 year history, maybe if they had spent a little more time and attention diagnosing conditions, looking at existing problems that were known long 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 this procrastination and ensure condo associations “take care of their needs and necessities for their condo owners” and are “held accountable.” “.

But, Simons warned, the proposed 10-year requirement for a reserve study is “not enough” and Florida should adopt a more frequent schedule.

“Best practice in our industry is for associations to conduct a formal survey, including a physical re-inspection of the property in question at least every three years,” Simons said. “Waiting 10 years between updates will allow charities to drift financially, only to find out far too late that what they’ve done hasn’t 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 structural analysis, but it is not the same as skills in budgeting and cash flow, a combination of building science and finance to prepare reserve studies,” he said.

And Simons said the legislation should not designate a “single checklist” for inspections and reserve requirements.

“Most condo associations will never experience the kinds of structural issues that have arisen at the Champlain Towers themselves, but that’s only if they take action along the way,” he warned. “To properly maintain their buildings, boards of directors can learn how to do it by doing regular reserve studies.

Perez said he’s prepared for the possibility that the more intensive inspections and reservation requirements will be too burdensome for some condo owners.

“It’s going to be a financial lift for condominiums that haven’t tracked their buildings like 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 funds to pay for repairs.

But the measure also allows condominium associations to put the entire building on the market and terminate the association if the cost of repairs identified during a phase 2 inspection is more than 65% of the fair market value. total association units.

List of regulations

The bill also requires:

  • Studies: Requires condominiums and cooperatives to conduct surveys every 10 years to indicate the extent to which their financial reserves are adequate to meet their needs for building improvements. Requires developers to conduct reserve studies before handing out a condo association to unit owners.
  • Reservations: Condominiums will no longer be allowed to pool reserve funds, and the funds must be earmarked for structural improvements.
  • Note: Local building officials must provide written notice to associations when buildings are to be recertified.
  • Disclosure: Requires recertification and Phase 2 reports must be submitted to building officials, unit owners and potential buyers of a condo unit. Reserve studies must also be provided to a potential condo buyer.
  • Penalties: Gives local building officials the ability to impose penalties on condominium associations for non-compliance with requirements for building recertifications and Phase 2 inspections.
  • Waivers: Overturns current law and prohibits condominium corporations from waiving reservations.
  • Controls: Inspections should be carried out by licensed engineers or architects.
  • Enforcement: The Florida Department of Business and Professional Regulation is authorized to enforce reserve studies and recertification inspection requirements.

However, the bill does not contain any provisions that will help condominium associations obtain financing to pay for necessary structural repairs.

Simons estimates there are thousands of Florida’s roughly 30,000 condo associations that are facing financial hardship because they’ve put off having to fund repairs “down the road for the next batch of homeowners.” .

“What we know for sure is that the majority of associations are not doing enough to fund their reserves or to somehow meet their core responsibilities,” he told reporters.

“So whether it’s a combination of reserves, loans or lines of credit, I think what people need to recognize is that the true cost of owning and living in a building in co-ownership must include some form of reinvestment in the property.”

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