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Articles Posted in Reserve Funding

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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Five months after the tragic collapse of the Champlain Towers South condominium in Surfside, Fla., several major organizations have developed a number of high-rise condo safety reforms and recommendations. However, most Florida counties and municipalities appear to be holding off in expectation of statewide changes to legislation during the next legislative session that starts in January.

The Community Associations Institute, which is the largest organization representing the interests of associations in the world, has issued a report with a number of public policy recommendations aimed at providing solutions for legislators addressing high-rise building safety. In addition, seven of Florida’s top architecture and engineering trade groups created a task force that has recommended re-inspections after 30 years with follow-ups every 10 years, and The Florida Bar has also completed the report and recommendations from its Condominium Law Life Safety Task Force.

CAI’s public policy recommendations cover the areas of reserve studies and funding, building maintenance, and structural integrity. The organization believes its recommendations should be considered for adoption into state law to support the existing statutory framework for the development, governance, and management of community associations. It is planning to release model statutory language in support of its policy recommendations.

In addition, federal mortgage lender Fannie Mae has released new project requirements for condominiums and housing cooperatives that will begin Jan. 1 for loans secured by units in high-rise buildings containing five or more attached units. The requirements place a heavy focus on structural and financial stability, and reinforces the importance of meticulous documentation of all appraisals, meeting minutes, financial statements, engineering reports, inspection reports, and reserve studies.

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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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