By Joel Engelhardt and Mary Hladky
Florida condominiums will be required to retain reserves to pay for structural defects under a bill passed May 24 during the special legislative session in response to the Surfside building collapse that killed 98.
The bill, added without notice in the session devoted to insurance reform and signed by Gov. Ron DeSantis on May 26, also requires condos to undergo structural inspections as they age.
But the reserve requirement appeared to be the sticking point in March, when legislators failed to pass a bill during the regular session.
While cities and counties could have required inspections, as Boca Raton and Highland Beach did in the fallout from Surfside, they can’t order condominiums to keep enough money on hand to pay for them — or for subsequent repairs.
“We can do everything we can do, but we can’t do that,” said Richard Radcliffe, executive director of the Palm Beach County League of Cities. “So it’s wonderful that they did that.”
Under the bill, condos and co-ops three stories or taller and within 3 miles of the coast must have a “milestone inspection” 25 years after opening and every 10 years thereafter. The first inspection for those farther from the coast would be 30 years.
In a review of property records last year, The Coastal Star found that 90% of the 348 condos along the barrier island from South Palm Beach to Boca Raton are more than 25 years old.
Buildings that opened before July 1992 would have until the end of 2024 to do their first inspections.
The initial Phase 1 inspection would be visual. If no signs of structural deterioration are found, a more in-depth Phase 2 inspection is not required.
But if there are signs of trouble, the next inspection would be more intrusive, including the option of chipping away at columns to determine structural integrity.
Those inspection reports must be distributed to every condo owner, be posted in a conspicuous place on the property and published on the association’s website, under the law.
It requires a reserve study that includes a physical analysis and a financial analysis, with the latter spelling out how much money is required to meet repair needs.
“At a minimum, a structural integrity reserve study must identify the common areas being visually inspected, state the estimated remaining useful life and the estimated replacement cost or deferred maintenance expense of the common areas being visually inspected and provide a recommended annual reserve amount that achieves the estimated replacement cost or deferred maintenance expense of each common area being visually inspected by the end of the estimated remaining useful life of each common area,” the law says.
If an association fails to complete a structural integrity reserve study, it is deemed “a breach of an officer’s and director’s fiduciary relationship to the unit owners.”
Board members can be sued if they breach their fiduciary duty.
Emily Gentile, president of the Beach Condo Association of Boca Raton and Highland Beach, generally supports the legislation, but has concerns about the sudden financial burden on those condos that do not have healthy reserve funds to finance repairs.
The bill repeals, as of Dec. 1, 2024, the ability of condo associations to waive the funding of reserves or to collect less reserve money than needed to make repairs. Many condos waive reserves, with the result that no money is available to fix problems and owners can face hefty special assessments to cover the costs.
While it’s very important to maintain adequate reserves, Gentile said, the requirement “is another financial burden on condominiums.” It could be lessened if condo boards are given more time to build up their neglected reserve accounts, she said.
The fiduciary provision makes it even more important that condo associations insure their board members, she said. Gentile also noted that condo units attract fewer buyers when there is ongoing litigation. The bill requires disclosure of inspection reports to potential buyers.
Despite her concerns, Gentile said condo boards should accept the changes.
“You have to stand up and say this is what we need to do to make sure we are OK,” she said.
By requiring inspections for coastal buildings after 25 years, the state law is slightly more stringent than Boca Raton’s ordinance, which requires inspections after 30 years.
When Boca passed the law in August, shortly after the June 24 collapse of Champlain Towers South, Mayor Scott Singer said it was important to act quickly to enhance safety rather than to wait for the state to act.
But Singer said then that he would be willing to revise the city’s ordinance so it would not conflict with state law. After the legislation passed, he said he anticipated a thorough review of it before decisions are made on what action the city will take.
“Our goal was to take proactive measures,” he said. “I am glad the state has reacted a year after we have.”
Boca Raton launched its building certification program in January when it sent out notices to 14 associations saying their buildings must be inspected. Additional notices would be sent out at three-month intervals until the owners of all 191 buildings that meet the city’s criteria for inspection are notified.
Inspections in Boca must be conducted by both structural and electrical engineers. If repairs are needed, the building owner must submit a repair plan to the city within 30 days.