AGE | UNITS |
50+ | 105,404 |
40-50 | 479,435 |
30-40 | 327,537 |
20-30 | 141,773 |
10-20 | 428,647 |
0-10 | 46,950 |
Most buildings will
have to be inspected once it 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.
From then on, inspections have to occur every 10 years.
While most people think of gleaming beachfront condos when
they talk about Florida living, 912,376 of the 1.5 million
condominium units in the state are more than 30 years old,
according to an October 2021 report from the Florida Bar. Of
those, 105,404 are more than 50 years old.
The units are governed by 27,588 associations.
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.
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.
Where the concern lies is in the second part of the law,
which 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.
At a minimum, the study must 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.
Alarm bells
The problem, Staebler says, is lawmakers included the
mechanical services alongside the structural items, “which
points to a lack of understanding what structural really
means and it will increase the financial burden even more.”
Among the items she believes lawmakers must go back and
remove from the list of services are electrical, plumbing
and fire protection systems because they aren’t related to
the structural components of building.
She says forcing associations to have the funding set aside
for future repairs of these items “will lead to extremely
high assessments and will bankrupt associations.”
“People will lose their homes. Living in condominiums will
become unaffordable for the mainstream public.”
While this may seem like hyperbole, the reason for sounding
the alarm is because the new law calls for associations to
set aside funds for the individual components rather than
pooling funds.
She uses an air conditioning unit as an example of how the
new system will work and why she’s worried.
Let’s say, she says, an HVAC unit has about a 10-year life
cycle and could cost about $10,000 to replace. The way the
new law is structured, when the unit is five years old the
association will need to have $5,000 in the bank, in an
account separate from that of other items, and then add
$1,000 each year for the its replacement.
If you break that down by individual components, she says
associations will have to raise millions and not be able to
touch a penny of that money if something else needs repaired
until it’s time for the repair or replacement of the
individual component.
She has clients who are now scraping by with about $200,000
a year by pooling funds. By requiring component funding,
these associations likely need to have $800,000 to $1
million.
Where will that money come from? Unit owners.
“It will not affect necessarily livelihood of the upper
middle class and beyond,” she says. “But now, when we are
talking about the medium income, low medium income
condominiums, just imagine what impact that will have on the
association and the unit owner.”
The majority of Florida condo dwellers fall into that latter
category.
The challenge state leaders face as they consider what, if
anything, to do about the reserves provision is if money is
not set aside for repairs or maintenance beforehand,
associations will be forced to pass special assessments in
order to address those issues, or emergencies, at the time.
Or worse, if the work isn’t completed you could one day see
a repeat of Surfside.
This creates a Catch 22 for low- and middle-income residents
who must pay now or later when in most cases they can’t
afford to pay either time.
And advisory task force studying condominium laws and safety
for the Florida Bar found in October that the effect of
special assessments on those with fixed incomes and limited
resources creates a financial burden that’s difficult, if
not impossible, for individuals to carry.
The task force recommends that government agencies —
federal, state and local — create programs that offer low
interest loans to pay for special assessments. While this
may only be a Band-Aid, it could at least help offset the
immediate cost to unit owners unable to pay when work is
needed.
The solution Staebler offers is to change how the reserves
are funded in the new law by removing the mechanical
components from the legislation.
Will either happen? Only time will tell.
The Community Association Institute, a Washington,
D.C.-based organization, pushed for the legislation and
praised the results.
But, as with any new law, sometimes the unintended
consequences aren’t immediately apparent, and tweaks are
needed. With that in mind, the CAI says it will work
“closely with policymakers before the bill takes effect in
2024 to be certain the new requirements and directives are
workable and practical for Florida’s impacted associations.”
Bottom
Line
Key takeaway: The way the new reserve funding system
is set up under new legislation could put a massive burden
on individual condominium owners and associations.
Core challenge: Finding the balance between making
sure associations have the funds to take care of critical
repairs and making sure residents can afford to pay
increased fees for reserved funds is not an easy task.
What’s next: The wait is on to see if the Legislature
will take a look at how reserves are funded or even if there
is enough of an outcry to make a change.