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The first major national condominium safety reform after the horrific tragedy of the collapse of the Champlain Towers South in Surfside, Fla., was announced in October when federal mortgage lender Fannie Mae said it will no longer back loans on units in residential buildings showing signs of structural deficiencies and deferred maintenance.
The federal mortgage underwriter’s new Temporary Requirements for Condo and Co-Op Projects are aimed at addressing the structural and financial health of buildings. The requirements mandate an in-depth review of safety, soundness and structural integrity conditions to determine a condominium tower’s eligibility. The end result will likely eliminate many thousands of condominium communities across the country from this vital source of financing for buyers.
Starting on January 1, 2022, Fannie Mae will no longer back and accept loans for condominium units in properties with significant deferred maintenance or which have been directed by a regulatory authority or inspection agency to make repairs due to unsafe conditions. 
Units in such buildings will remain ineligible for purchase by Fannie Mae until the required repairs have been made and documented.
The conditions and deficiencies that meet the criteria for disqualification include full or partial evacuations, damage or deferred maintenance that affects structural integrity, and the need for substantial repairs for one or more of a building’s structural or mechanical elements including the foundation, roof, load bearing structures, electrical system, HVAC, plumbing, and others. Also, properties that have failed to pass local regulatory inspections or recertifications will not be eligible.
Fannie Mae will also begin requiring reviews of all current or planned special assessments. It will scrutinize the reasons behind special assessments, their amounts and terms, and any additional documentation reflecting on the financial stability, viability, condition, and marketability of the project. For special assessments implemented to fund matters involving safety, soundness, structural integrity or habitability, the lender will require that all repairs be fully completed for communities to regain their eligibility. In addition, reserve funds and funding will also come into consideration, and properties that do not meet minimal reserve requirements will no longer be eligible.
Based on these new requirements, condominium communities can expect to see many mortgage lenders adopt similar reviews and mandates as part of their residential underwriting procedures.
In addition, all eyes will be on the Florida legislature for proposed new condo safety reforms when it reconvenes next month. A coalition of Florida building professionals has developed recommendations, and so has a Florida Bar task force as well as the Community Associations Institute, which is the leading national organization representing the interests of community associations.
Given the nature of Fannie Mae’s new requirements and the calls for similar new mandates from these and other sources, including of course from the state’s property insurance industry that is expected to also impose stricter standards for structural oversight and maintenance, now is the time for aging Florida condominium towers to take a proactive approach. The boards of directors for these communities and their property managers would be well advised to begin consulting closely with highly experienced condominium engineering, financial, insurance and legal professionals to assess their current and future needs, and begin planning accordingly to keep ahead of the curve and help avoid any disruptions that could have a negative impact on property values.
Our firm’s other South Florida community association attorneys and I write regularly about important matters for associations in this blog, and we encourage association directors, members and property managers to enter their email address in the subscription box on the right to automatically receive all our future articles.