UPDATE: Florida Legislature Passes Condo Inspection Law in Wake of Surfside Tragedy
Sun May 29, 2022 by Oppenheim Law on Florida Real Estate
The Florida Legislature unanimously approved a condominium safety bill, S.B. 4D, this past week, which now awaits the Governor’s signing. Pursuant to that bill, buildings three stories or higher and thirty years old will have to undergo strict safety inspections and every ten years thereafter. Buildings within three miles of the coast must be inspected before they are twenty-five years old, and then inspected every ten years.
The inspection reports must detail the building’s structural deterioration, whether the deterioration is safe or not, and whether it requires repair. Copies of these reports must be distributed to all condo unit owners, and the condo boards must conduct reserve studies every ten years to determine how much each owner must pay to cover future repairs. Condo boards will not be able to waive reserve requirements or use the reserves for other purposes.
As discussed in an earlier blog, the 2022 Florida State Legislature did not initially pass a proposed law which would have created one of the strictest condo inspection and reserve funding requirements within the United States. The legislation was an attempt to prevent tragedies such as the horrific Surfside, FL collapse last June, which raised issues of condo ownership, collective responsibility for condo maintenance and upkeep, and inadequate reserves. Unfortunately, the requirement of financial reserves was perhaps the biggest issue. Condo unit owners routinely do not vote in favor of annual proposals for their buildings to carry substantial cash reserves. As a result, unless the association imposes a special assessment on its members for large repairs, the repairs are not done.
Should the Governor sign this bill, there will be more oversight into the structural integrity of condos. However, whether the condo owners will be able to provide monetary reserves, especially in older buildings that may in fact necessitate higher reserves, remains to be seen. If there are substantive repairs needed for the safety of condo’s structure and there are condo owners who are not able to pay the assessments, there may be an issue as to whether those owners would potentially face foreclosure by the association. The condo documents may need modification to address this issue.
Further, should increased reserves be necessary, potential purchasers of the condo may be reluctant to purchase within a specific condo, leaving many units unsold. As a result, there may be more people looking to rent the units.
Developers and investors also may continue to potentially negotiate and offer lowered prices to tear down aging condo buildings in order to build new construction because the issue of maintenance and repair costs still exists. For, if that does not occur, local building departments will have to rev up their code enforcement policies and begin the unpleasant process of condemnation of entire buildings.
Finally, insurers will certainly increase their premiums on liability policies on older buildings that do not have adequate reserves as their financial exposure will invariably increase.
What does this all mean?
In order to prevent tragedies like Surfside, mandatory inspections of condos are needed. Requiring reserves is also necessary in order to prevent and repair the structural integrity of the condos. New developments and existing condos will be required to build in a reserve allocation into their annual budgets. However, the question as to whether condo owners, especially those in older condos, will be able to bear their pro rata share remains to be seen.
From The Trenches
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