A recent segment on
Fox Business Network’s Mornings with Maria show focused on
the financial repercussions of Florida’s new condominium
safety law on the state’s condo associations and their unit
owners. The segment, which is featured on the network’s
website highlighting a quote from a panelist saying the law
will “end up bankrupting a lot of people,” offers a fairly
bleak outlook for the future finances of the state’s
condominium communities and, subsequently, their unit
owners.
The host and panelists point out that the mandates for
reserves and engineering safety inspections/reports
represent new expenses that will need to be borne by condo
owners. Their message to recent buyers or those who may be
considering a condo in the Sunshine State: Do your homework
and come to terms with the fact that the current monthly
association dues for many properties are very likely going
to see substantial increases in the near future. Panelist
Mitch Roschelle also bemoans that after the Champlain Towers
South tragedy, many condominium owners in the state are no
longer willing to serve on their board of directors for fear
of exposure to potential legal liabilities for their votes
and decisions.
While it did paint a particularly gloomy outlook for the
state’s condo associations and owners, this recent morning
news show segment was not the first and certainly will not
be the last of the national news media reports focusing on
the coming increases in Florida condominium association
budgets created by the state’s new safety reforms. There is
no doubt that many properties are going to need to increase
their monthly dues and/or enact special assessments to
address immediate needs together with the coming inspections
and reserves requirements.
The most helpful and informative media reports will offer
insights from experts on how associations and owners/buyers
should approach the challenges that lie ahead. First off,
they should point out that concerns over board member
liability should never deter owners from volunteering to
help the community they call home maximize the property
values for themselves as well as their fellow owners. Board
members are shielded from liability under a community’s
Directors and Officers insurance, which defends and protects
them from lawsuits, in addition to the indemnification
provisions of the articles of incorporation of their
association and the Florida laws governing not-for-profit
corporations.
Essentially, directors who act in a reasonable manner and
seek the guidance of qualified professionals will be able to
rest assured that their indemnity and insurance protections
will shield them from liability. They will also be protected
by the business judgment rule, which holds that directors
have broad discretion in performing their duties absent a
showing of mismanagement, fraud or breach of trust.
Instead of becoming overly preoccupied with unwarranted
liability concerns, now is the time for condominium owners
to do their part to help ensure their association is
overseen by the very best directors. For most properties
that have been well maintained and do not have any immediate
needs, the increased costs should not prove to be too
burdensome, but those with little or no reserves and
immediate needs could face severe budget increases.
Condominium associations are going to need excellent boards
of directors comprised of dedicated owners to meet the
looming budgetary and financial challenges.
Now is the time for them to get ahead of the curve by
contacting and vetting engineers, reserve study specialists
and other experts to prepare for the coming inspections and
funding requirements. Increases will probably be required,
so associations that do not already have a finance/budget
committee may wish to consider implementing one, especially
if they have unit owners who are eager to take part in the
process behind the calculations and adjustments that are
likely to be necessary. The horrific tragedy of the partial
collapse that claimed 98 lives took place in Surfside, but
that does not mean condominium safety is only a Florida
issue and concern. The state’s new condominium safety
reforms, which may see some modifications and improvements
during this year’s legislative session, should serve as a
model for other states to follow.