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Articles Posted in Renovation Projects

The new condominium safety financing requirements from Fannie Mae and Freddie Mac have drawn a great deal of attention, but the Florida Legislature appears to be poised to go one step further in its response to the horrific Champlain Towers tragedy.

The Florida House and Senate are both moving forward with bills that would add new inspection requirements on condominium buildings. A bill that is now ready to go before the full Senate, SB 1702 would require condominiums that are three stories or taller and located within three miles of the coast to undergo initial inspections 20 years after completion and every seven years thereafter. Buildings in other areas would be required to be inspected after 30 years and every 10 years thereafter.

Flalegislature-300x169The Florida House has taken up its own version of the bill (HB 7069). Its proposal would require initial inspections to occur 25 years after completion, and buildings further inland would have their first inspection at 30 years. Additional inspections would be required every 10 years.

The House and Senate bills also include differences over reserve studies, which are used to determine the level of funds a condominium community needs to maintain in reserve for future renovations and repairs. The differences between the two bills are likely to soon be consolidated into a final bill for bicameral consideration.

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Gary-Mars-2021-2-200x300When the editors of the Miami Herald decided they would like to feature a new column to provide timely legal knowledge on real estate topics for the readers of its Neighbors community news section that appears on Sundays, they turned to the attorneys of Siegfried Rivera as the exclusive contributors for the newspaper’s new Real Estate Counselor.  The inaugural edition of the new monthly column authored by the firm’s Gary M. Mars appears in today’s edition and as is titled “All Eyes on Florida Legislature for High-Rise Condo Safety Reforms.”  It focuses on the status of reforms after the horrific tragedy of the Champlain Towers South collapse.  Gary’s article reads:

. . . So far, the most significant changes have come at the federal level from Fannie Mae and Freddie Mac, two government-sponsored companies that acquire residential loans to offer mortgage-backed securities for investors in the secondary market. They both have a massive influence over the terms for mortgages offered by lenders, and they recently released new requirements for loans for residences in high-rise buildings with five or more attached units to meet their standards for acquisition. The changes, which are now being adopted and implemented by major residential lenders, place a heavy focus on structural and financial stability, and they reinforce the importance of meticulous documentation of all appraisals, meeting minutes, financial statements, engineering reports, inspection reports and reserve studies.

Miami-Herald-1-23-22-1006x1024Fannie’s new requirements are already in effect, while Freddie’s will take effect for all mortgages with settlement dates on or after Feb. 28. Its new standards will exclude from eligibility any condo loans for units in communities with what it considers to be critical repair needs, which are defined as those that significantly impact a community’s safety, soundness, structural integrity or habitability, and/or that impact unit values, financial viability or marketability. These include all life-safety hazards, violations of any laws or ordinances, building code violations, fire-safety deficiencies and others.

Subsequently, properties that have already identified elements requiring attention and begun their remediation efforts may become ineligible until such work is completed.

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RobertoBlanch_8016-200x300The 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.

Sun-Sentinel-RBlanch-1-21-22-print-clip-1-1024x519The 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.”

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As my fellow firm partner Laura Manning-Hudson wrote recently in this blog, Fannie Mae’s new condo-safety financing requirements for condo buyers are now in place. Following suit, federal mortgage buyer Freddie Mac has also announced similar requirements for condominium loans to meet its standards for acquisition for its mortgage-backed securities for investors. Both of these changes are heralds of the stricter mandates that condominium associations are likely to see as a result of the horrific tragedy of the collapse of the Champlain Towers South in Surfside, Florida.

Freddie Mac’s new requirements, which take effect for all mortgages with settlement dates on or after Feb. 28, exclude from eligibility for acquisition any loans for units in condominium communities with what it considers to be critical repair needs. Subsequently, properties that have already identified elements requiring attention and begun their construction and remediation efforts may become ineligible until such repairs and renovations are completed.

fmac-300x300The federal agency defines critical repairs as those that significantly impact a community’s safety, soundness, structural integrity or habitability, and/or that impact unit values, financial viability or marketability. These include all life-safety hazards, violations of any laws or ordinances, building code violations, fire-safety deficiencies, and others.

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The Community Associations Institute, the leading organization representing the interests of condominium associations and HOAs, is considering several policy reform recommendations on matters such as building inspections as well as reserve studies and funding in the wake of the devastating tragedy of the Champlain Towers South collapse in Surfside, Fla.

According to a recent post in its Ungated blog at blog.caionline.org, the organization’s Government and Public Affairs Committee convened a special meeting recently to hear the recommendations from three task forces on new public policy reforms as well as best practices and guidance for local, state and federal legislators.

CAI-logoThe three task forces focused on building inspections and maintenance; reserve study and funding plans; and insurance and risk management. They have recommended that the committee focus on reforms such as having developers provide a preventive maintenance schedule for all components that are the responsibility of the community association, not just the components included in the reserve study. They also recommended baseline inspections and regular inspections based on specific intervals, the protocols for which can be found in the American Society of Civil Engineers’ Guideline for Structural Condition Assessment of Existing Buildings, and disclosures of the findings to homeowners, residents and local governments.

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berenice-m-mottin-berger-2021-300x300LTLehr-2018-Siegfried-Rivera-200x300An 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. dbr-logo-300x57As never before, association boards and unit owners have become keenly aware of the importance of maintaining adequate financial reserves to fund future construction projects.

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Eduardo-Valdes-srhl-lawAn article authored by firm partner Eduardo J. Valdes is featured in the op-ed “Opinions” page of today’s South Florida Sun Sentinel.  The article, which is titled “Post-Surfside, condo associations must be proactive with change | Opinion,” focuses on the impact that the horrific tragedy of the Champlain Towers South collapse has had on the condominium associations for similar towers nationwide and their boards of directors.  Eduardo notes that in addition to the shared grief and remorse with the families and friends of all the victims, many condo owners across the country are now raising questions about their own buildings’ structural safety and financial health, and some have also begun to feel more concerned about the funding of reserve accounts for major repairs and replacement projects.  His article reads:

 . . . All buildings deteriorate over time, so associations should always set aside funding on an ongoing basis to mitigate and remediate any structural elements that require attention.

As they begin reassessing their associations’ commitments, condominium boards of directors will generally try to avoid special assessments demanding additional funds from all the unit owners. They will need to consult with legal, financial, engineering and insurance professionals to strike a balance between the funding of reserves and the use of special assessments when they become necessary from a life-safety standpoint.

Sun_Sentinel_Logo-300x97Condominium association directors and unit-owner members would also be well advised to come to terms with the new reality that future buyers will now have many more questions and concerns than in the past about the financial health of the association and current state of the actual property from the ground up. Some will surely request that sellers provide them with the minutes from prior board meetings, information on any past or planned special assessments, the status of renovation and remediation projects, past changes to the monthly assessments over the years, the findings of past reserve studies, and the status of current reserve funding. They are also now more likely to conduct a thorough visual inspection of the entire property prior to making a written offer.

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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.

constdefect1Because 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.

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The collapse of the Champlain Towers South condominium has been a human tragedy of unimaginable proportions, and the unspeakable grief and horror of its aftermath have been shared deeply by our law firm.

Our firm’s community association law attorneys have made helping condominium communities to contend with construction defects a particular focus of our work.  We believe reforms should be considered to require engineers to report certain serious conditions to local building departments wherever they find them.  This would take discretion out of equation and immediately involve building inspections, permits being issued and repairs being completed.  We also suggest there should be new federal/state government aid and/or low-interest federally backed loans for condominium associations that now engage in major structural repairs.

Our attorneys are also concerned by the great deal of misinformation that is currently circulating over the legal liabilities of association board members.  We note that lawsuits against a condo association are ultimately against the building’s insurer and possibly all the unit owners, as the owners can be held responsible for their association’s liabilities.  The firm’s attorneys have been reaching out to our clients to remind them of importance of prioritizing engineering findings in their turnovers to new board members and property managers, and to focus on structural issues over aesthetics and fund reserve accounts for any necessary repairs.

Stuart-Sobel-2013-200x300Our firm’s attorneys have also been sharing their insights on these and other issues with major media outlets as well as some of Florida’s lawmakers and policymakers, and we have scheduled a free live webinar on 40-year recertifications and structural maintenance for today at 1 p.m. (click here for information and online registrations).  The Sun Sentinel and Daily Business Review immediately turned to our board certified construction and condominium law experts for their input in the aftermath of the collapse.  A front-page article in the Sun Sentinel that appeared in the Friday, June 25, edition titled “How to Know if Your Condo Tower is Safe” includes insights from firm partners Stuart Sobel (pictured here) and Roberto C. Blanch.  The article reads:

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Jeffrey-Respler-high-res-200x300Shareholder Jeffrey S. Respler authored an article that is featured as the “Board of Contributors” guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Association Construction Contracts Require Deft Negotiation by Legal Counsel,” focuses on the nuances of construction contracts that community associations execute with general contractors for major renovation and remodeling projects.  It reads:

. . . Construction contracts often represent some of the costliest expenses that condominium associations will ever approve, yet many associations fail to utilize the necessary legal resources and expertise to craft and execute the most effective terms and agreements. Instead, they focus merely on obtaining competitive bids, as most associations are required to do for projects exceeding 5% of their total annual budget (10% for HOAs), and often neglect to consult with highly qualified and experienced legal counsel to negotiate and finalize every aspect of their agreement with a general contractor.

Without a lawyer involved, a poorly negotiated and written construction contract can have serious consequences. Having a qualified and experienced attorney draft or review an association’s contract can help avoid risks and expensive disputes. Dealing with the aftereffects of a poorly negotiated or poorly written contract can be far more expensive than paying a lawyer to do it correctly in the first place. An experienced attorney can draft and negotiate a contract that will protect an association’s interests and be legally sound.

dbr-logo-300x57Attorneys write contracts in ways that favor their clients. Attorneys with experience in the construction industry will know the customary contract terms, and they will draft a contract in their client’s favor. If the contractor is drafting the contract, its lawyer will be doing exactly that.

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