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Gary-Mars-2021-2-200x300For the second time in the last several months, firm shareholder Gary M. Mars authored an op-ed editorial column in the Miami Herald on a vital new piece of federal legislation to provide for condo-safety financing options for condominium associations and their unit owners.  Gary’s new article, which is featured in today’s op-ed Opinion page of the Herald, discusses what he calls a perfect storm of rising insurance, inspections, repairs and reserves expenses that could jeopardize the finances of many South Florida condominium associations and force some owners to either sell or face the prospect of foreclosure.  It reads:

. . . A recent Palm Beach Post article chronicled how the Portofino South Condominium in West Palm Beach received an 82% increase from its insurance carrier, while its directors and residents had expected an increase of about 25%, which the community got in 2021.

Mary McSwain, 67, who bought her one-bedroom unit in January, said her monthly dues are going from $914 to $1,347.

GMars-Herald-op-ed-8-2-22-for-blog-137x300For most communities, increased insurance costs will come first, but increases created by the provisions of the state (and some county) mandates for structural inspections, repairs and reserve funding are sure to follow. Those provisions do not start until 2024 for the affected buildings, but association boards would be well advised to begin securing and vetting offers from qualified professionals for their long-term budgetary planning.

A federal proposal introduced recently by Florida U.S. Reps. Charlie Crist and Debbie Wasserman Schultz, together with another bill from the same lawmakers introduced in April, could provide relief for communities in immediate need of substantial repairs and renovations. The new Rapid Financing for Critical Condo Repairs Act of 2022 would let the U.S. Department of Housing and Urban Development’s Federal Housing Administration insure condominium association building rehabilitation loans issued by private lenders.

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Jonathan-Mofsky-2021-2-200x300The firm’s latest “Real Estate Counselor” column in today’s Miami Herald is authored by partner Jonathan M. Mofsky and titled “Ruling Shows Pitfalls of Associations Enacting Changes Without Required Votes.”  It focuses on a recent ruling by Florida’s Fifth District Court of Appeal that illustrates the potential consequences of associations that undergo alterations to their amenities and enact rule changes without the required vote and approval of their unit owners.  Jonathan’s article reads:

. . . The case initially stems from a filing for mandatory non-binding arbitration with the Division of Florida Condominiums, Timeshares and Mobile Homes under the Department of Business and Professional Regulation. Michelle and Kevin Flint, owners of several units at the Lexington Place condominium in Orlando, objected to the condo association’s elimination of a common element dog park and a court for wallyball (i.e., a sport similar to volleyball played on a racquetball court). They alleged the association performed these material alterations without a vote and majority approval of the unit owners in violation of its own declaration of condominium.

The Flints also challenged a board-enacted rule that prevented tenants from maintaining pets at the condominium, which they claimed violated the pet restrictions contained in the declaration.

JMofsky-Herald-clip-for-blog-7-31-22-103x300The couple prevailed in these proceedings on both issues. However, the association chose to escalate the matter by filing a lawsuit in Orange County circuit court based on the same arguments originally presented in arbitration.

The circuit court also ruled in favor of the Flints and affirmed the arbitrator’s decision. After considering the different provisions in the association’s declaration as well as the arguments of the parties, the court found that because the association’s declaration required approval by a majority vote of the unit owners prior to performing the alterations, the association’s board of directors alone lacked the authority to eliminate the community’s dog park and wallyball court.

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Laura-Manning-Hudson-Gort-photo-200x300Firm partner Laura Manning-Hudson is quoted in an article on the rise in condominium terminations in South Florida, and the disputes that often arise in communities considering such buyouts of all the units by developers hoping to raze the building and raise a new one its place.  The article reads:

. . . The process is known in Florida as a condominium termination. In other states, it’s called a deconversion and it’s happening in cities like Chicago where apartment-to-condo conversions during the early 2000s haven’t succeeded as planned.

According to the Department of Business and Professional Regulation, terminations of 336 condominiums encompassing 24,761 units were approved by the state Division of Condominiums, Timeshares, and Mobile Homes over the decade beginning July 1, 2012. They ranged in size from two units to 544. Thirty-nine were in Broward County, 86 were in Miami-Dade County, and 24 were in Palm Beach County.

LManning-Sun-Sentinel-clip-for-blog-7-18-22-94x300Between 2013 and 2019, the annual number of terminations ranged from 32 to 43. During the pandemic, as eviction moratoriums were imposed, the number of terminations fell to 19 in 2020 and 22 in 2021. Eleven terminations have been approved by the division so far in 2022.

But real estate experts predict that terminations will increase in Florida as condo associations seek to avoid strict and costly requirements enacted in May in the wake of the Champlain Towers collapse last year in Surfside. The new laws require associations with buildings at least 30 years old and over three stories high to, before 2025, conduct structural inspections and amass enough money in their reserves to fund necessary structural repairs.

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LTLehr-2018-Siegfried-Rivera-200x300The firm’s latest “Real Estate Counselor” column in the Miami Herald appears in today’s newspaper and is again authored by partner Lindsey Thurswell Lehr.  Her column, which is titled “Condo Terminations Require Ample Consideration by Association Directors and Unit Owners,” focuses on the rise in South Florida in condominium terminations involving building-wide purchases of all the units by developers.  While such terminations may be inevitable for some buildings, Lindsey writes that they are typically contentious with some owners steadfastly opposed to the forced sale of their property.  Her column reads:

. . . Florida’s condominium termination statute is one of the most controversial aspects of the state’s condo laws. The current statute, which has seen several significant changes over the years, enables owners to work together in the bulk sale of their units to a developer hoping to demolish a condominium and build a new one in its place.

Currently, the statute allows for an optional termination with a vote of 80 percent of the unit owners, but it also enables five percent or more of the owners to block a termination from proceeding for a period of 24 months by rejecting it in writing or via a negative vote.

LLehr-Herald-clip-for-blog-7-17-22-300x217As my fellow firm partner Oscar Rivera wrote in this column in February, condominium developers are now setting their sights on many potential targets for termination bids in South Florida’s red-hot real estate market.

For aging properties that are now uncovering potential structural life-safety issues, the lessons from Surfside cannot be ignored. They must either immediately ratify a plan to fund and execute the necessary repairs and remediation, or they must work to secure the best possible condo termination exit strategy for all the unit owners as expeditiously as possible.

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LTLehr-2018-Siegfried-Rivera-200x300The latest edition of the firm’s Miami Herald “Real Estate Counselor” column appears in today’s edition of the newspaper and is authored by Lindsey Thurswell Lehr.  The article, which is headlined “Community Associations Should Consider Amending Their Amendments Process,” focuses on the inability for many community associations to amend their governing documents, and it suggests a possible solution.  Lindsey’s article reads:

. . . Declarations, covenants and bylaws are recorded in the local court registry and provided to all buyers prior to their purchase, as they essentially set the terms of the contract and serve as mini constitutions setting forth the rights and duties between unit owners and their association.

These governing documents are originally codified by a community’s developer, and they often include dated and problematic provisions that are in dire need of updating as communities grow and owners’ goals change.

However, amendments to an association’s recorded governing documents often require a vote of the unit-owner membership, and sometimes the documents demand a minimum approval of two-thirds or even three-quarters of all the owners for an amendment to be ratified.

LLehr-Herald-clip-for-blog-7-3-22-103x300Such voting thresholds are extremely difficult for most communities to achieve. In fact, many Florida communities have difficulty achieving the legally mandated minimum voter-participation requirements to conduct valid board member elections or hold membership meetings.

Indeed, changing the recorded governing documents is often significantly more difficult than matters requiring only a simple vote of the board of directors, but communities with troublesome and outdated provisions should still take the challenge head on and make it a priority.

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Gary-Mars-2021-2-200x300The firm’s latest Miami Herald “Real Estate Counselor” column by Gary M. Mars appears in today’s print edition of the newspaper and is titled “Community Associations Should Break Ties with Developer, Board Members During Turnover.”  The article focuses on the turnover process by which control of a community’s operations and management is transferred from its developer to the home/condo buyers.  Gary notes that this is one of the most critical junctures for the future administrative and financial wellbeing of all condominium and HOA communities, and those owners who have made the investment to be the charter members of their new association should always begin their takeover with the same vital step: breaking ties with the developers’ board members and experts.  His article reads:

. . . Turnover is when a new community’s unit owners get their opportunity to hire independent legal counsel, financial professionals, and engineers to conduct meticulous audits and inspections. A very careful review of all a community’s rules and business records, as well as the physical state of the entire property, is very much the order the day. The end goal is to hold the developer, as well as its contractor, suppliers and design professionals, accountable for any budget shortfalls and construction deficiencies.

GMars-Herald-clip-for-blog-6-20-22-300x230Given the nature of the task at hand, this work should always begin with the careful vetting of prospective advisor accountants, attorneys and engineers to ensure only independent and highly qualified professionals are retained by the new owner-controlled board, which must be expeditiously transitioned away from any directors and professionals appointed by the developer during its preceding control of the association, or with any ties to the developer.

The financial, engineering and legal experts retained by the new unit owner-controlled board of directors will be charged with representing the interests of all the owners by holding the developer, contractor, suppliers and design professionals to their warranty and financial obligations. They should also be tasked with changing any rules regulating community affairs, collections policies, and construction matters that were in place under the developer’s regime for its primary benefit.

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RobertoBlanch_8016-200x300The firm’s latest Real Estate Counselor column in today’s Miami Herald is authored by Roberto C. Blanch and titled “Lawmakers Deliver Huge Milestone in Evolution of Florida’s Condo Laws.”  The article focuses on the state legislature’s passage of the most far-reaching condominium safety reforms in Florida since Hurricane Andrew.  It reads:

. . . The changes include many of the proposals from engineering, legal and community association industry task forces aimed at studying the perceived shortcomings that led to the Surfside catastrophe. They require inspections for buildings three stories or higher 30 years after completion and every 10 years thereafter. Buildings within three miles of the coast must be inspected at 25 years, then every 10 years. The first buildings impacted are slated to be those constructed before July 1, 1992, as they must complete their first structural inspections prior to Dec. 31, 2024.

The inspections are aimed at identifying any substantial structural deterioration that may present life-safety dangers, and whether remedial or preventive repairs are recommended. RBlanch-Herald-clip-for-blog-6-5-22-99x300The reports on their findings will be required to be distributed to association unit owners, prospective buyers and local building departments, which may then require the start of repairs within specified timeframes if substantial deficiencies are identified.

Associations will also be required to conduct reserve studies every 10 years for the funding of structural repairs and, most important, beginning by 2025 they will no longer be allowed to waive funding of many reserve components.

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The tragic collapse of Champlain South Tower has prompted various changes state-wide in regards to condominium safety-reforms. Although just last week Florida passed its first ever state-wide condominium safety reform bill, on June 1, 2022 Miami-Dade County’s Board of County Commissioners released an ordinance establishing even more stringent procedures for the recertification process. The following are key takeaways:

  • All buildings (except single-family homes, duplexes, and structures housing fewer than 10 people) must undergo recertification upon reaching 30 years of age and every 10 years thereafter.
  • Local jurisdictions will provide buildings with a courtesy notice one and two years prior to their recertification anniversary.
  • Buildings will also receive a reminder 90 days before the report submission due date of recertification deadline.
  • The same notice schedule applies for the 10-year incremental recertifications.

shutterstock_783519631-300x200Buildings and structures built between 1983-1992 must undergo recertification for their 30-year period on or before March 31, 2024. They are not subject to the courtesy notification requirement.

  • Buildings built between 1983-1986 are exempt from the 30-year recertification requirement, only if a 40-year recertification report for the building would be otherwise due before March 31, 2024, and such report is timely submitted.
  • Within 90 days of the Notice of Required Inspection, a written report must be submitted to a building official certifying that the building is both structurally and electrically safe for continued occupancy. Submission of a report will also be deemed timely if submitted any time between two (2) years before the building’s recertification anniversary.

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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-300x198Milestone 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.

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RobertoBlanch_8016-200x300Just 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.

RBlanch-Herald-clip-for-blog-5-27-22-281x300The 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.

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