Budgets and Reserves

August 5, 2022

Increases from Insurance, Inspections and Reserves Rattling Many Condominium Communities

A recent article in the Palm Beach Post chronicled the early signs of the financial strains that Florida condominium associations are beginning to experience. Unfortunately, these early issues involving increased insurance costs represent just the beginning, and things are indeed expected to get worse in the months and years to come.

The article discusses how the 51-year-old Portofino South Condominium in West Palm Beach (pictured below) received a renewal quote from its insurer with an 82 percent increase over the prior year. It had expected an increase of around 25 percent, which was what it got for 2021, so the board of directors had to call a special meeting to increase the association’s annual budget and hike up its monthly dues for its owners.

Mary McSwain, who bought her one-bedroom unit in January, told the Post’s Kimberly Miller that her dues are going from $914 a month to $1,347.

“And it’s likely to get more expensive for owners under the new condo law approved during a special legislative session,” the article reminds readers.

pfino-south-300x200 Indeed, while most of those safety provisions do not become effective until 2024, the law will require significant new inspection and maintenance measures on older condos three stories or higher, as well as dedicated reserves to pay for structural repairs.

For the owners at Portofino, the news is even worse. State law now requires it to install a new fire-sprinkler system by Jan. 1, 2024, and that is expected to cost its unit owners more than $7 million.

June 1, 2022

Florida Legislature Passes Swift Safety Reform Bill During Special Session

by Laura Manning-Hudson

Laura Manning-Hudson

Condominium safety reforms were very much in the spotlight during this year’s regular session following the unforgettable tragedy in Surfside, Florida. Though legislators could not agree on legislation pertaining to safety reforms during the regular session, they successfully did so during a special session. In a surprising move, Senate Bill 4-D unanimously passed in both the House and Senate and was recently signed into law by the Governor. The following are the key takeaways from the 88-page bill:

The “Milestone Inspection”

Florida has now imposed a state-wide structural inspection program for condominium and cooperative associations that are three (3) stories or more in height defined as a “milestone inspection.”
Community association managers or management companies contractually hired by a condominium association that is subject to this inspection must comply with this section as directed by the board.
Milestone inspections must be performed by December 31 of the year in which the building reaches 30 years in age, based on the issue date of the building’s certificate of occupancy, and every 10 years thereafter. Buildings located within 3 miles of the coastline must perform a milestone inspection by December 31 of the year in which they reach 25 years in age, and every 10 years thereafter. Buildings with a certificate of occupancy that was issued on or before July 1, 1992 must have the initial milestone inspection performed before December 31, 2024.
Condominium and cooperative associations are responsible for the scheduling and costs associated with the milestone inspection.
Milestone inspection means a structural inspection of a building’s load-bearing walls and primary structural members/systems.
Milestone inspections must be performed by a Florida licensed engineer/architect who must attest to the life safety and adequacy of structural components of the building. To the extent that it’s reasonably possible, the inspection must determine the general structural condition of the building as it affects the safety of building, such as necessary maintenance, repairs and replacements of structural components.
“Substantial structural deterioration” is described as substantial structural distress that negatively affects the building’s general structural condition and integrity.

fla-legislature-300x198 Milestone inspections will consist of two phases:

- Phase one — Visual examination of habitable/nonhabitable areas of building. If there are no signs of structural deterioration found, phase two is not required.
- Phase two — If substantial deterioration is found during phase one, phase two may involve destructive or nondestructive testing at the inspector’s discretion. This additional inspection may be as extensive or limited as necessary to fully assess areas of distress.
- Architect/engineer who performed inspections must submit a sealed copy of the inspection report and findings to both the association and appropriate local building official
Local enforcement agencies will provide buildings required to comply with this law notice of required inspection by certified mail.
Upon receiving notice, condominium/cooperative associations will have 180 days to complete phase one of the inspection.

May 27, 2022

Roberto Blanch Again Quoted by Miami Herald in Follow Up Report on Florida’s New Condo-Safety Reforms

by Siegfried Rivera

Siegfried Rivera

Just two days after his insights were featured in the Miami Herald‘s initial article on the Florida legislature’s proposed new condominium-safety reforms, Roberto Blanch‘s input on the changes that unanimously passed in both the House and Senate on the state’s condominium associations and owners were prominently featured in the newspaper’s follow up report on today’s front page. The article, which is headlined “‘A Major Move Forward in Safety.’ A Look at How Condo Reforms Will Work,” focuses on the new requirements for condominiums to conduct regular building inspections and build sufficient cash reserves to cover structural maintenance and repairs. The article reads:

. . . The changes are laid out in a set of amendments to Florida’s condo law approved by the state House and Senate on Tuesday and Wednesday. In a surprise, the Legislature acted swiftly this week during a special session designed to address the home-insurance crisis after coming under substantial public pressure for doing nothing to shore up condo inspections and regulations following the Surfside tragedy, which claimed 98 lives.

The reform law generally hews to detailed findings and recommendations issued after Surfside by public-interest groups that include the Florida Bar, the Miami-Dade County Grand Jury, a consortium of Florida professional engineer associations, and the Community Associations Institute, a national organization that represents thousands of associations, managers and residents.

The reforms had broad but not uniform support from principal sectors of the condo industry, including association representatives, condo lawyers and real estate brokers. Together, backers say, the reforms should markedly boost confidence in the safety of Florida’s condos.

May 25, 2022

Roberto Blanch Quoted in Today’s Miami Herald Article Headlined “Legislature Reaches Deal on Condos”

by Siegfried Rivera

Siegfried Rivera

The firm’s Roberto Blanch was the first independent expert source quoted in a report in today’s Miami Herald on a new bill filed yesterday during Florida’s legislative special session on home insurance that appears to be on track to be the most significant overhaul of the state’s condominium laws in decades. It was passed by the full Senate yesterday and is poised to be approved by the House today.

The proposed measures, which are in direct response to the horrific Champlain Towers tragedy that claimed 98 lives, include statewide inspections for aging condominium buildings and requirements for condo associations to hold money in reserves to pay for repairs. The bill also requires developers of new buildings to fund reserves, and it imposes legal liabilities on board members who ignore inspection requirements.

The Miami Herald article, which appears under the headline “Legislature Reaches Deal on Condos,” reads:

. . . [The bill] would require condominium associations to conduct reserve studies every decade to make sure they have the resources to finance needed structural repairs. Starting in 2025, they would be barred from waiving a requirement that they put money in reserves to make structural repairs, although they could continue to waive collecting reserve funds for other improvements.

There are hundreds of condo buildings in South Florida and more across the state that would need to ramp up funding quickly if the bill passes, said Roberto Blanch, a Miami-based condo attorney for Siegfried Rivera.

“That is very likely going to impart upon [condo associations] a heavy financial burden,” Blanch said. “It’s kind of like quitting smoking cold turkey. There’s not going to be any gradual step-down for these folks. That could, in some buildings, become a very tough pill to swallow.”

May 3, 2022

Op-Ed Article in Today’s Miami Herald: “After Surfside, Federal Condo-Safety Legislation Deserves Bi-Partisan Support”

by Siegfried Rivera

Siegfried Rivera

The firm’s Gary M. Mars was the first South Florida community association attorney to weigh in on the recently proposed SAFER in Condos Act in a major local media outlet with his article in today’s op-ed page of the Miami Herald. The article, which is titled “After Surfside, Federal Condo-Safety Legislation Deserves Bi-Partisan Support,” focuses on the SAFER in Condos Act that was recently introduced in the U.S. Congress by Florida representatives. It notes that questions regarding condominium safety have been in the spotlight since the horrific Champlain Towers tragedy that claimed 98 lives, and changes failed to pass in the state legislature but have been enacted at the federal level from lenders and also at the local level from counties and municipalities. Gary’s article reads:

. . . Part of the reason the state legislature could not agree on a set of reforms was because the new funding requirements for structural repairs would have been too much for the unit owners of many condominium communities to bear. Plus, financing options for both condominium associations and their unit owners for such extremely costly property restorations were getting worse by the day, as interest rates have been on the rise and are predicted to continue climbing.

For a problem of this magnitude and national scope, only the federal government has the capability and resources to truly make an impact. Its first effort at addressing it was proposed on April 18 by U.S. Reps. Charlie Crist (D-St. Petersburg) and Debbie Wasserman Schultz (D-Broward, Miami-Dade) in the form of the Securing Access to Finance Exterior Repairs (SAFER) in Condos Act of 2022. The legislation would allow condominium owners to finance critical building repairs with loans backed by the Federal Housing Administration (FHA). Unit owners would be able to combine a special assessment from their association for structural repairs with their existing mortgage debt into a new, 30-year loan insured under the FHA home rehabilitation program.

For those who do not have a mortgage or would prefer to leave it as is and continue to pay it off, the legislation also grants owners access to the FHA Property Improvement Program to finance such an assessment over a 20-year term.

Continue reading

April 14, 2022

The Path Forward for Florida Condo-Safety Reforms

by Roberto C. Blanch

Roberto C. Blanch

Florida’s legislature has received very poor marks for its failure to pass any condominium-safety reforms after the horrific Champlain Towers tragedy. Many condominium residents and community association attorneys expected the state’s lawmakers would strike a deal on a bill to revamp Florida’s existing condo regulations by requiring periodic inspections of buildings.

Pundits and newspaper columnists are lamenting the fact that the two chambers ultimately could not agree on whether to require condominium associations to maintain financial reserves for major structural maintenance and repairs. Given the horrific tragedy that claimed 98 lives, not-to-mention the significant number of aging buildings across the state with potential structural deficiencies, it is no surprise that there has been an outcry after the legislature failed to act.

Taking into consideration that this year’s legislative session began just over six months after the collapse, the legislature’s inability to establish mandatory safety reforms and require specific funding conditions for condominiums throughout the state was actually not very surprising. The issues of high-rise structural inspections, condominium association financial reserves, and mandatory fire sprinklers have flummoxed lawmakers in Florida and other states for decades.

Florida’s legislators should now take the time to work through the difficult details of condominium high-rise safety reforms during the remainder of the year and the pre-session legislative meetings for the 2023 session. There may not be a one-size-fits-all solution for condominium buildings of varying heights and stages in their lifespan.

January 21, 2022

Lead Front Page Sun Sentinel Article on New Condo Loan Requirements After Surfside Collapse Quotes Firm’s Roberto Blanch, Recent Blog Post

by Siegfried Rivera

Siegfried Rivera

The lead article at the top of today’s front page of the Sun Sentinel titled “Collapse Drives Tougher Loan Standards” begins with quotes from firm shareholder Roberto C. Blanch and goes on to include quotes from his recent blog post on the topic. The article, which also appears in the Miami Herald’s website, focuses on the new condominium loan requirements from Fannie Mae and Freddie Mac, the government-sponsored enterprises that make mortgages available to low- to moderate-income borrowers. It reads:

. . . Reacting to last year’s tragic collapse of the Champlain Tower South in Surfside, Fannie Mae and Freddie Mac, the two companies that back a majority of residential mortgages in the U.S., are scrutinizing deferred condo maintenance issues before approving 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 have issued temporary requirements for condo and co-op projects to ensure that buildings are structurally sound, and that associations that govern them have the money to pay for repairs.

The upshot, legal and real estate analysts say, is that some condo buyers around the nation may need to find other sources if they want to finance their purchases. The rules could make it harder for some owners to sell, and place more pressure on condo inventories already tightened by heavy demand.

“It is without a doubt a more heightened scrutiny than what was previously being requested,” said attorney Roberto C. Blanch, who specializes in community association law at the Siegfried Rivera firm in Coral Gables. “The focus is on ensuring the safety and structural soundness and viability of buildings.”

September 20, 2021

Article Authored by Lindsey Thurswell Lehr and Berenice Mottin-Berger in Today’s Daily Business Review: “Funding Community Association Repairs and Renovations”

by Siegfried Rivera

Siegfried Rivera

An article authored by the firm’s Lindsey Thurswell Lehr and Berenice Mottin-Berger was featured as the guest commentary column in the online edition of today’s Daily Business Review, South Florida’s exclusive business daily and official court newspaper, and will soon appear in the print edition. The article, which is titled “Funding Community Association Repairs and Renovations,” concentrates on how the funding of long-term condominium maintenance, repair and replacement projects has become a major focus at many communities across the country after the horrific tragedy of the collapse in Surfside, Fla. It notes that many association board members who previously might have avoided increasing monthly assessments and implementing large special assessments are now looking to evaluate and address the inevitable deterioration of their buildings. Lindsey and Berenice’s article reads:

. . . Rather than kicking the can down the road in hopes that future boards will address worsening maintenance concerns, association directors are coming to terms with the fact that delayed repairs and maintenance are likely to exacerbate structural problems and increase the eventual costs, in addition obviously to the potential life-safety risks, to be borne by the owners. As never before, association boards and unit owners have become keenly aware of the importance of maintaining adequate financial reserves to fund future construction projects.

July 26, 2021

Assessing the Condition of Condominium Towers

by Roberto C. Blanch

Roberto C. Blanch

The recent tragedy in Surfside, Fla., has significantly impacted our firm and the communities we serve. Our heartfelt thoughts and prayers remain with the victims and families affected by the Champlain Towers South collapse.

In the aftermath of this horrific catastrophe, many condominium association directors, members and managers have raised various questions concerning the safety and stability of their own buildings. Our firm’s other South Florida community association attorneys and I have been responding to many of these inquiries regarding the process of assessing building structural and mechanical elements, and undergoing any repairs and restorations as needed.

Because buildings age and mature differently, with possible conditions developing at different points of a building’s lifespan, associations must assess the structural integrity of their buildings and keep up with proper maintenance protocols, even in advance of the triggering of the 40/50-year recertification process. By doing so, associations can gather accurate snapshots of their buildings’ structural health, perform proactive repairs, and organize the funding necessary to move forward with large projects.

December 1, 2020

Community Associations Face Challenging Financial Considerations for Continued Fiscal Wellbeing During Pandemic

by Roberto C. Blanch

Roberto C. Blanch

As new spikes in Covid-19 cases continue to unfold and communities seek to maintain their mitigation measures, the financial trials and tribulations created by the pandemic in condominium association and HOA communities throughout the country become ever more apparent. The continued proliferation of Covid-19 cases underscores that while many may be letting their guard down and growing fatigued as to the measures to protect against the spread of the virus, community association stakeholders should remain proactive and forward-thinking in order to best position their associations for the consequences that may arise due to the pandemic.

Some community associations have begun to experience the burdens resulting from lower collections rates caused by strains on the job market due to the pandemic. While the exact impact on the many types of community associations may be unknown, it has been suggested that delinquency rates could exponentially increase. In response to such expectations, we continue to suggest that community association boards and managers should continue considering the development of acceptable uniform payment plans that may be offered to those who have lost jobs and businesses.

Similarly, some have proposed that community associations should also think about postponing discretionary improvements to community amenities until late 2021 or even 2022.