Learn how new building safety legislation is reshaping condo communities
The collapse of the Surfside condominium in Florida sent shockwaves through the state. In its aftermath, the Florida Building Safety Act, also known as Senate Bill 4-D, was passed by the Florida Legislature in May 2022 with the aim of preventing future tragedies.
However, the impact of this legislation goes beyond just ensuring safety measures. It has also brought about significant changes in how Condominium Owners Associations (COAs) operate, creating a new landscape for the future of these communities in Florida.
Understanding the Florida Building Safety Act and its Impact
Florida COAs are facing new financial challenges due to the new law, which requires condominiums three stories or higher to conduct regular reserve studies and inspections to determine building safety and the need for any necessary repairs. These studies serve as a budget planning tool and roadmap for condo communities, outlining how much to set aside for repairs annually over 30 years.
Before the new law, associations were allowed to waive reserve contributions through a membership vote, resulting in many condos having insufficient funds for necessary repairs. As a result, associations must plan their budgets strategically to ensure they have adequate reserves and can meet the regulatory demands of the new law.
“Until now, associations have been waiving reserves and only dealing with the most minimal items of capital expenditure to keep the property functioning,” said John Cadden, Managing Principal with Condominium Advisory Group. “And as we all know, it results in instances like Surfside, where an association has millions of dollars worth of work to do but can’t get a consensus from its owners to fund the work, and the worst thing happened.”
SB 4-D requires condos that are three stories or higher to do the following by December 31, 2024 and subsequent ones every ten years after:
● Conduct a milestone inspection on condos 30 years or older
● Conduct a structural integrity reserve study
These mandates impose a huge financial and logistical burden on Florida COAs as they rush to collect funds and determine construction-related needs. Experts like the ones at Condominium Advisory Group can ease this burden through financial and construction consultancy services that guide you through the complicated process of complying to the new mandates.
The Solution: What does this mean for Florida condominium associations?
The new mandates set up SB 4-D can be complicated for Florida associations to navigate, but with the right knowledge, it can be stress-free. Many condo owners who aren’t aware of the new law or their options will pay more than they need to.
As an association, examining how the new law affects your property is essential to make informed decisions and determine the best route. This may involve exploring options such as construction, receivership or deconversion. Understanding each approach’s potential benefits and risks is critical before making a move.
Option 1: Construction/Repair
Owners may consider investing in construction or renovation projects to meet the requirements of new laws. While this option may require a significant upfront investment, it can improve the overall value and appeal of the property in the long run.
Option 2: Receivership
If your association is in financial distress and unable to collect enough funds to cover maintenance, repairs, and other condo community costs due to the new law, allowing a team like Condominium Advisory Group to step in as a receiver might be the best solution. With a receivership, a third party is appointed to manage the property and make necessary repairs or improvements. This can help address any financial challenges and ensure the property remains well-maintained.
Option 3: Deconversion/Termination
The Florida Condominium Statute provides condominium associations with an orderly and transparent disposition option through a termination. This legal option can be a valuable resource for associations navigating challenging circumstances. Termination involves converting the condo units into rental apartments or selling the entire building to a developer. This can mitigate the impact of new regulations and potentially increase property values.
Obtaining an approved termination plan before going to market for sale will give the association the most control over the process and yield the highest price. Planning and having a well-thought-out strategy can significantly affect the outcome.
Option 4: A different option altogether
Ultimately, the best solution will depend on the specific circumstances and goals of the association. Engaging with legal and financial experts and consulting with other condo owners and associations can provide valuable insights and guidance throughout the decision-making process.
Looking Ahead
The implementation of the Florida Building Safety Act has and will continue to have, a significant financial impact on condominium associations in the state. As we look forward to 2025, it’s easy to predict a difficult time for condo owners.
Condominium assessments will double, if not triple, in the next few years due to insurance expenses and the cost to fund reserves appropriately. As experienced condominium owners ourselves, we at Condominium Advisory Group are acutely aware of the financial strains these expenses will impose on the condominium owner community.
As condos in Florida navigate the changing landscape brought about by its new law, it’s essential to have strategies to adapt to these new challenges. By planning and strategizing, condo owners take control of the process and outcome for their condominium community.
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