Q: I have heard that there will be efforts to change the new condominium law about inspections and reserves. Can you shed any light on what the proposals might be and their chances of passing? (S.G., via e-mail)
You can read my initial summary of the new statute in my column “Enforcement of New Structural Safety Law Examined,” dated July 3, 2022.
SB 4-D, effective May 26, 2022, is arguably the most significant change to the condominium and cooperative statutes ever. The effects on the market in terms of affordability, unit values, and public perception of the safety of condominium living are yet to play out. Given current economic uncertainties, the effects could be substantial.
As noted in my previous column, the legislation was enacted rather abruptly in a special session of the Legislature called for other purposes. Perhaps predictably, this resulted in a few “glitches” in the statute. Transformational legislation is often passed with the understanding that it will need to be refined further.
It is likely that we will see some efforts at “glitch legislation” before the law is in full force as of January 1, 2025. Of course, predicting future outcomes in the political arena is educated guesswork on a good day. I do not predict that there is any realistic chance that the law will be repealed or altered in any fundamental way. There may, however, be some discussion of the new reserve rules, which are inflexible to say the least.
Here is a list of what I see as some of the more significant unanswered questions:
- Timing of the Milestone Inspection: There is a conflict in the statute. One section states that milestone inspections and reports for older buildings must be completed by December 31, 2024. Another section states that an association has 180 days from receipt of certified mail notice from the local building official to complete the process.
- Impact on One- and Two-Story Buildings: While the statute exempts one- and two-story buildings from the requirement for a milestone inspection and structural integrity reserve study, it does not contain a specific exemption regarding the new prohibition against waiving or reducing full funding of certain statutory reserves.
- Preparation of Structural Integrity Reserve Study (“SIRS”): The new law permits the SIRS to be prepared by a “qualified” person. However, reserve analysts are not licensed or regulated in Florida, so who is “qualified” is not stated. Additionally, the visual inspection upon which the SIRS is based must be done by a Florida licensed architect or engineer. Since most reserve study companies do not have field engineers engaged in this process, it remains to be seen how this is this going to work.
- Pooling Reserves: The law will prevent use of reserve funds for “SIRS components” from being used for other purposes. It is unclear whether this means that “pooled” reserves are no longer permitted, or whether associations can still have a “pool” for the “non-SIRS” items, or perhaps a “SIRS-pool” and a “non-SIRS pool.”
- Windows: The statute requires the SIRS to contain a line item for window replacement. The declarations for many condominium communities make the maintenance, repair, and replacement of windows a unit owner responsibility. It is not at all clear how this is supposed to be addressed. The statute also does not identify what “windows” include or exclude. Sliding glass doors and glass “curtain wall” systems are two examples of gray areas.
- Officer/Director/Management Liability: The statute imposes a cause of action for breach of fiduciary duty against directors and officers and imposes a compliance duty on community association managers and management companies. Since the statute already contains fiduciary obligations, many ask whether the statute was intended to impose greater liability on volunteers. It also remains to be seen how the management industry will react regarding their indemnification requests during management contract negotiations.
There are a number of other issues, including applicability to non-residential and time share projects, how to define what a “coastline” is, and how to calculate the number of “stories” in a building, to name a few.
Time will tell.
Joseph E. Adams is a Board Certified Specialist in Condominium and Planned Development Law, and an Office Managing Shareholder with Becker & Poliakoff. Please send your community association legal questions to jadams@beckerlawyers.com. Past editions of the Q&A may be viewed at floridacondohoalawblog.com.