SURFSIDE — Late last year, after years of
delays and disputes, the Champlain Towers South Condominium
Association began a desperate search for $16.2 million to
fix major structural damage that was slowly threatening the
Surfside high-rise — and that may have contributed to the
building's partial collapse June 24.
The obvious place to look was the building's reserve fund —
extra money socked away to cover the cost of future repairs.
But the account held just $777,000, according to condo board
documents — nowhere near enough to soften the blow.
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Rescuers search for victims at a collapsed condo building on July 5, 2021, in Surfside, Fla., after demolition crews set off a string of explosives that brought down the last of the Champlain Towers South building. |
The law lasted just
two years before it was repealed in 2010, after Robaina left
office. Robaina blamed pushback from real estate lawyers and
property managers, who he said claimed that the law was too
burdensome for condo owners. The legislator who sponsored
the repeal, former state Rep. Gary Aubuchon, a Republican
real estate broker and homebuilder, did not reply to
messages seeking comment.
The repeal left Florida's condo residents less protected
than those in nine states that legally require reserve
studies, according to the Community Associations Institute,
a nonprofit organization that advocates for condo
associations. Thirty-one other states, including Florida,
regulate reserves in some way — although Florida is one of
three states with loopholes that enable owners to opt out of
requirements, the nonprofit said. Ten states have no
regulations about reserves at all.
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Rescue workers search in the rubble at the Champlain Towers South Condo, in Surfside, Fla., on June 26, 2021. |
The lack of a
professional reserve study is a departure from what many
experts say is best practice for condominiums, particularly
older ones on the coast — like Champlain Towers South, built
in 1981 — that have been exposed for decades to corrosive
salt and water.
Robaina, who co-owns a property management company, said
maintaining healthy reserves "is the single most important
action that a condominium board needs to take."
Florida law requires condo boards to maintain reserves for
repairs over $10,000, but it does not say exactly how much
to set aside. That means condo boards have some flexibility
in avoiding saving for repairs that do not need to be made
right away.
In addition, the law allows condo buildings to waive the
reserve requirement altogether. Once it has passed its
annual budget, a condo board can give residents the
opportunity to opt out of collecting reserves by a vote of a
majority of unit owners. The votes are common in Florida
condo buildings, condo lawyers say.
That is what it appears Champlain Towers South did, lawyers
and reserve experts said.
The experts pointed to the board's reliance on special
assessments — additional fees on top of residents' normal
monthly payments — to fund needed repairs. The board imposed
a $1 million special assessment in 2016 for hallway
renovations and a $350,000 special assessment in 2019 for
work on a generator, a fuel pump and a fuel tank. Such
lump-sum levies are indicative of a building whose owners
have decided not to set aside enough reserves through
regular monthly fees, choosing instead to wait until a
big-ticket repair is needed to ask residents to pay for it,
experts said. Many associations make that choice by
repeatedly voting to waive or reduce the funding of their
reserves.
"I can't help but think that the building did that for years
and years, which is why there was not enough funds
available," said Matthew Kuisle, Southeast regional director
for Reserve Advisors, which prepares reserve studies. "Why
would they do that? So they have lower fees. But in the long
run, the fees are a small price to pay."
The shortcomings of that approach started to become clear in
2018, when the board began inspecting the building before a
checkup mandated by Miami-Dade County for buildings that
reach 40 years old. In an October 2018 report, engineer
Frank Morabito alerted the board to "major structural
damage" to concrete slabs underneath the building's pool
deck and its entrance drive. He blamed a "major error" in
the building's construction and years of corrosion. He
estimated the cost of repairs at $9 million.
Reeling from sticker shock, the board invited a Surfside
building official to its November 2018 meeting. The official
told the board that the building was "in very good shape,"
according to minutes of the meeting. Some residents have
said that led them to believe the situation was not dire.
Even so, the board began trying to find a way to repair the
damage — and to pay for it.
Disagreements over the costs frustrated board members. Five
members quit over two weeks in fall 2019. The condo
association has had four presidents since 2018.
By late last year, the board had accepted that there was no
safe way forward without doing the massive reconstruction
Morabito recommended, along with repairs to a deteriorating
roof. Morabito began preliminary work and found that the
damage discovered in 2018 had gotten worse. The bill rose to
more than $16 million.
The board scrambled for money. It found $707,000 left over
from the previous special assessments and $777,000 more in
reserves. But a quarter of the reserves were designated for
insurance deductibles, leaving $556,000. The board chose not
to tap the reserves just in case there was another
emergency. That meant the building was short by $15.5
million, which the board voted in April to raise through a
special assessment. The cost to residents would be $80,000
to $360,000 per unit.
"A lot of this work could have been done or planned for in
years gone by. But this is where we are now," board
President Jean Wodnicki wrote to residents before the vote.
By last month, the board had started work on the roof, and
it put other repairs out for bid. Responses were due July 7.
Two weeks before the deadline, the building partly
collapsed.
The board's nearly three-year struggle to start work on the
concrete replacement project has loomed over the
catastrophe's aftermath. Investigators have not determined
what caused the failure; the deteriorating supports are
among the possibilities.
Experts say the extent of disrepair documented in the 2018
report raises questions about how the damage went unnoticed
previously.
"I read the report, and I wondered how long the building
looked that way," said Robert Nordlund, founder and CEO of
Association Reserves, a reserve study firm based in
California. "Did it look that way in 1998? 2008? Because
clearly there was some significant deterioration in that
2018 report."
Documents reviewed by NBC News and NBC Miami, including
audits, budgets, financial statements and board meeting
minutes, do not indicate when the structural issues noted by
Morabito started, though the board did pay to replace
leaking pipes in the building’s parking garage in 2016. But
the documents do show that the board did not perform
professional reserve studies and instead relied on board
members to determine how much to set aside for repairs. In
2016, an accountant performing a year-end audit noted that
"an independent study has not been conducted to determine
the adequacy of the current funding" and that "the estimates
for future replacement costs are based upon estimates
provided by the budget committee."
Audits conducted by the same accountant in 2017, 2018 and
2019 included the same language. Last year, a different
accountant provided a similar disclaimer.
Mars, the lawyer who represents condo associations, said he
believes that the note was "the CPA saying, 'We don't have
any official documentation to rely on.'"
The accountants who conducted the audits did not respond to
messages seeking comment.
Jeffrey Rembaum, another lawyer for condo associations,
pointed to figures in the audits that showed that from 2016
to 2020, the board did not update the amount of money needed
to replace balconies and concrete. Each year, the board
estimated needing $320,000 for the work, even after
Morabito's report found that much more extensive and costly
repairs were needed.
"We know the building had millions in concrete repairs on
the horizon," Rembaum said. "So how did it come up with
$320,000 for their current needs? If they'd had a reserve
study and an engineer looked at what they had, they would
have come up with a higher number. That suggests the board
wasn't regularly updating it."
He added: "This is the effect of the Florida Legislature not
requiring a reserve study by qualified people."
More than a decade since his short-lived law on reserve
studies was repealed, Robaina said he hopes lawmakers will
change course and reimpose the mandate.
"This is a window of opportunity," he said, "and
unfortunately it took a tragedy that could have been
prevented."