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Business Observer Monday, Jun. 6, 2022 2 months ago

Condo safety measures approved by state lawmakers

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New condo regulations approved by Florida lawmakers during a special session aim to prevent a repeat of the Surfside collapse.
by: Louis Llovio Commercial Real Estate Editor

Following the Florida Legislative special session in late May, much of the attention was paid to a package of property insurance reforms designed to try to bring a system in crisis under control.

But along with property insurance reform, lawmakers, to the surprise of some, also approved legislation to address condominium safety. Even more surprising is at a time when partisan strife seems to be only getting worse in Tallahassee, lawmakers in both the Senate and the House voted unanimously for the bill.

This legislation, passed less than a year after the collapse of the 12-story Champlain Tower South in Surfside, is designed to put measures in place to prevent a repeat of that tragedy, which killed nearly 100 residents. Among the measures approved were mandating inspections and installing stopgaps to prevent condo associations from having capital shortfalls to address needs.

The new regulations were approved after state lawmakers failed to pass any major reform on condominium safety earlier this year, this despite concerns a big chunk of Florida’s condominiums are aging and could face issues similar to those that caused the collapse.

According to the Washington, D.C-based Community Associations Institute, 75% of condominium buildings in Florida with 20 to 49 units were built before 1990. As for buildings statewide with more than 50 units, 59% of those were built before 1990.

The federal government stepped in in a limited capacity when it issued a set of rules through Fannie Mae and Freddie Mac late last year requiring banks, borrowers or building owners provide detailed records about a building’s maintenance history, repairs and how future maintenance will be paid for before it buys a loan for the original lender.

But those rules didn’t do much considering a large number of buyers in the market were paying cash or had access to other financing sources. And critics of the rules say rather than promote safety, the requirements simply made buying harder for those without deep pockets.

Meanwhile, without new safety regulations in place some local government officials began to look at passing their own safety measures. In Longboat Key, for example, town leaders crafted rules of their own but held off on considering them in May, when they heard the special session on property insurance would also include condo safety, according to the Longboat Key Observer, sister paper of the Business Observer.

The new law, signed by Gov. Ron DeSantis about a month shy of the anniversary of the Surfside collapse, was sponsored by Rep. Daniel Perez, R-Miami-Dade. In a speech on the House floor and on social media afterwards, he says the goal was to make condominium living safer and that the new rules would be a legacy of the collapse.

“We were able to accomplish — not just for Surfside families but for all Floridians that live in condominiums — a product that they should be proud of, a product that is one step closer to making sure what happened in Surfside never happens again,” says Perez in a statement posted on Twitter.

Milestones

One of the main provisions of the new law is a requirement that buildings more than three stories tall get milestone inspections.

These inspections, as the name implies, are to be completed at specific periods in a building’s life. Most buildings will have to be inspected once the building reaches its 30th birthday — based on when it received its certificate of occupancy. For buildings within three miles of the coast, the inspection needs to be done at the 25th birthday. The inspections need to be done by Dec. 31st of that year.

From then on, inspections have to occur every 10 years.

These structural inspections aren’t just going to be cursory glances at a building. The new rules call for licensed architects or engineers to look at load-bearing walls and primary structural systems. The reason for the inspections is to verify the life, safety and adequacy of the structural components and to determine how the general structural condition of the building affects the maintenance, repair or replacement of structural components, according to the legislation. 

The inspections will be done in two parts, with phase one calling for a visual examination of the major structural components of a building and an assessment of its conditions. There is a phase two, but it’s not required if there aren’t signs of substantial deterioration during the first inspection.

“We were able to accomplish … a product that is one step closer to making sure what happened in Surfside never happens again.” — Rep. Danny Perez, R-Miami-Dade

If there is trouble, phase two calls for the person who did the inspection to submit a sealed inspection report with a summary of the findings and recommendations sent to the condominium or association board. Local officials with jurisdiction over the building must also get a copy of the report.

This report has to describe how the building is deteriorating and identify recommended repairs.

Repair work must start within a year of when local authorities receive a copy of the phase two inspection report.

The new measures go into effect Dec. 31, 2024. Buildings that qualify for the milestone inspections must have them completed by then.

 

Reserves

The second part of the law is designed to assure associations have the financial capabilities to pay for repairs and maintenance when needed.

That’s a critical step in making condominium buildings safer. According to news reports, the association board of the Surfside condominium tower allegedly knew there were structural issues with the building for at least three years and were working on a special assessment to pay for the repairs and deferred maintenance when the building collapsed on the early morning of June 24, 2021.

The legislation requires associations and co-ops to have reserve funding in place to pay for issues affecting the structural integrity of a building and for maintenance identified in a structural integrity reserve study. This is a state-mandated study that every building three stories or taller must complete every 10 years in order to create a financial plan for future repairs and maintenance.

The study of common areas has to state how much useful life remains and estimate the replacement cost or the deferred maintenance cost. Plus, it must come with a recommendation for the annual reserve amount.

The study must, at a minimum, include an inspection of any item that has a deferred maintenance expense or replacement cost topping $10,000. That includes the roof, load-bearing walls, floors, foundation, fireproofing and fire protection systems, plumbing, electrical systems, waterproofing and exterior painting and windows.

The mandate that an association have enough money in its reserves to cover repairs and deferred maintenance is what doomed an effort to pass these provisions during the regular Legislative session in January.

Jordyn Ferguson, an analyst with Shumaker Advisors, writes in a May 26 note to clients that during the regular session updating safety statutes for condominium buildings was “discussed extensively.” But the House and Senate could not reach a compromise.

The issue, she writes, was the Senate “was adamant that associations be able to opt-out of the reserve requirement, and the House was not willing to budge on requiring them.”

The two sides were able to agree before the special session began and the legislation that passed is nearly identical to the one proposed earlier this year, she writes, “with former discrepancies having this time been settled prior to introduction.”

Under the new rules, starting Dec. 31, 2024, association must have reserves in place and those funds cannot be used for any other purposes.

 

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