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Hours after the catastrophic partial collapse of the Champlain Towers South condominium in Surfside, stunned members of condo communities along the South Florida coast predicted the disaster would trigger a massive ripple effect of residents scrambling for ways to ensure that tragedy would not strike their homes.
But the seriousness of the episode was not compelling enough for a majority of lawmakers in Tallahassee to act. The 2022 state Legislature failed to agree on a package of safety reforms that would have required inspections of older buildings, mandated financial reserves for condo associations and provided more public transparency for maintenance and inspection reports.
Before Surfside, Broward and Miami-Dade counties were the only counties statewide to require condo associations in buildings 40 years or older to conduct inspections of their buildings. And Florida law makes it easy for condo owners to take a pass on funding reserves for future repairs on their buildings.
After Surfside, Boca Raton installed one of the strongest inspection laws in the state, requiring safety and structural inspections for every building older than 30 years and taller than three stories or 50 feet. And a Broward task force, among other things, urged the Legislature last fall to require that condo buildings be inspected more often, including a proviso that they a keep special fund for repairs.
But state lawmakers fell short of converting any recommendations into law.
“They were real numbskulls this time,” said Frank Simone, general counsel and partner at KW Property Management and Consultants in Sunrise, which advises hundreds of homeowner associations and condominium boards around Florida. “It’s amazing,” he said, that lawmakers could approve a slate of bills covering a variety of social “wedge issues,” but not critical safety reforms for high-rise residential buildings.
For legal, management and real estate professionals in the condo industry, the ramifications are clear: the private sector is creating its own agenda for gathering more safety and inspection information from associations before approving financing for condo purchases. Banks, insurance companies, mortgage underwriters and investors are pushing rules that compel governing associations to disclose more detailed technical information about the structural integrity and histories of buildings, as well as what is being done to correct problems.
“The private sector is already taking over,” Simone said.
“Insurance companies are demanding and wanting more and more information to underwrite and insure,” he said. “Mortgage companies want more and more information in connection with questions of structural soundness and whether there are code violations or other violations at the condo property. They have not waited on the Florida Legislature because they have fiduciary obligations to their investors.”
Tougher loan underwriting measures
Earlier this year, buying a condo in an older building got a little tougher for people seeking to finance their deals. Loans backed by Fannie Mae or Freddie Mac, two private companies created by Congress, started to scrutinize maintenance issues more closely before approving buildings for loans generated by banks and other lenders.
Generally, they will not back loans for condo and co-op units if their buildings have put off major repairs, industry experts say. Both companies issued temporary requirements for condo and co-op projects to ensure that buildings are structurally sound, and that associations governing them have the money to pay for repairs. The result: associations have been confronted with having to answer more detailed questionnaires about the status of maintenance issues at their properties than they have in the past.
Many association advocates and real estate professionals say the tougher rules are making it harder in some instances for owners to sell, placing more pressure on Florida condo inventories already tightened by heavy demand.
“We have urged them to suspend their regulations until they’ve had some time to allow the [condo management] industry to set up an infrastructure to answer these questions,” said Dawn Bauman, senior vice president of government and public affairs for the Community Associations Institute of Falls Church, Virginia. “We appreciate the intent. We want nothing more than safe buildings.”
The institute estimates there may be as many as 20,000 condominium buildings that would have been impacted by the proposed Florida legislation. If the House and Senate had been able to reconcile their differences, the ensuing law would have benefitted 9.6 million Floridians, the institute said.
Reserves the major sticking point
The chief difference between the House and Senate was that the former’s version would have required a short time frame for associations to collect reserve funds to pay for big ticket repair items, said attorney William Skar, managing partner of the Tallahassee office of Carlton Fields, and chair of the Florida Bar’s Post-Surfside Champlain Towers South Condominium Life Safety Advisory Task Force.
A number of the task force’s recommendations made their way into both House and Senate bills, Sklar said. The included provisions for better transparency of inspections reports, the maintenance of financial reserves by associations to cover future reports, requirements for inspections and for maintenance.
The financial reserve issue was the biggest sticking point between the two legislative houses, he said. Historically, condo unit owners in associations statewide have routinely vote down annual proposals for their buildings to carry reserves because they cost too much. As a result, a number of South Florida associations whose buildings face big repair bills can’t fund them without imposing large special assessments on their members.
Under current state law, it doesn’t take a large quorum of association members to vote ‘no.’
Sklar’s task force recommended lifting the quorum requirement to 75%. He said Perez wanted two-thirds; the House 50%.
“It’s not a question of whether reserves are needed,” Sklar said. “Everyone who provided testimony agreed reserves were necessary. It was just a matter of methodology of getting there.”
He said the House version “was not viable” as it would have forced associations to maintain reserves in the hundreds of thousands or millions of dollars “in a short period of time.”
“The Senate decided, ‘we’re not going to deal with it until next year,’” he said. “The Senate was doing the right thing. The House was not being realistic.”
Attempts to reach the bills’ sponsors, Rep. Daniel Perez, R-Miami, and Sen. Jennifer Bradley, R-Orange Park, were unsuccessful.
Some condo lawyers argue that it was too ambitious to expect that a sweeping safety bill could be passed in a short three-month legislative session.
“I know it was very, very ambitious legislation,” said Gary Mars, a condo lawyer at Siegfried Rivera in Coral Gables, “It would have taken a lot of effort to get it through all of the machinations developing legislation of this type.”
He noted that not every building is in dire structural straits, or even old enough to be required to follow inspection rules such as the ones in Broward and Miami-Dade counties, which mandate deep-dive studies after 40 years.
“I represent a lot of associations in buildings in their teenaged years,” he said.
“They’re getting sophisticated reports” from their engineers about deferred maintenance issues such as waterproofing, balcony restorations and painting, Mars said. But the reports don’t cover structural issues.
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“They may have wonderful reports, but those reports don’t give the association the ability to check the box” about the building’s overall condition, he said. “There’s not a perfect solution to this problem.”
Barring a special session of the Legislature to focus on condo safety, Florida will have to wait until next year.
Elsewhere, state legislation governing building inspections for multifamily buildings has been introduced in Hawaii, Maryland, and Virginia, said Bauman of the condominium institute. The Virginia General Assembly passed legislation that requires the state’s housing commission to study condominium safety issues with an emphasis on building inspections.
“The Maryland legislature is considering funding for condominium buildings in need of critical repairs, while Hawaii is considering building inspection requirements for condominiums” the institute said in a statement.
Bauman said her institute is taking a three-pronged approach:
- Best Practices: Encouraging boards to make sure they are regularly inspecting their buildings. It involves conducting “reserve studies” that entail evaluations of major components of a building that have life expectancies of usually 20 or 30 years or less, and a plan for budgeting to replace components such a roof, air conditioning system, elevator or stairwell. Regular maintenance should be performed on elements not contained in the study. Reserves should also be maintained.
She said the institute doesn’t say a fixed amount should go into reserves. “We believe you should have reserves funded that your study professional recommends at the time of the study,” she said. “it should be updated every five years.”
- Back to the Legislature: Continuing to work with lawmakers in Florida, where “coming together on all of the details was a challenging task. A three-month period is difficult.” She said the institute intends to return to Tallahassee “so that leading into next year’s legislative session we’ll have a bill that everybody is comfortable with,” adding, “I am impressed with the Florida legislators that worked so hard moving this legislation as far as they did.”
- Congress: Bauman said the institute is working for the Florida delegation led by U.S. Reps. Charlie Crist, D-St. Petersburg, and Debbie Wasserman Schultz, D-Weston, to introduce a condo safety act. It would not be about inspections and reserve issues, she said, but would look at existing federal programs that can help fund building rehabilitation and repair programs, including homes occupied by senior citizens.