Florida lawmakers will soon meet for first time in a post-Surfside world. Will they change any laws?
Will Florida lawmakers implement any condo law reforms in the wake of the Surfside condo collapse? Here are some of the reform ideas being recommended.
Weeks after the collapse of the Champlain Towers South building in Surfside that left 98 people dead last summer, the Florida Bar convened a special task force charged with coming up with potential reforms that could prevent that type of tragedy from ever happening again.
Named the Condominium Law and Policy Life Safety Advisory Task Force, the Florida Bar released its final report of recommendations to lawmakers in October. On the heels of that report the Miami-Dade State Attorney’s Office released its own grand jury report, also outlining a series of potential reforms and recommendations.
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A significant part of both reports deals with questions of how to deal with deferred maintenance work, delayed repairs, and how to get condo boards to overcome pushback from penny-pinching residents who do not want to pay for needed repairs, or who perhaps can’t afford the needed repairs.
These were all issues faced by residents of the Champlain Towers South building, prior to its collapse. The backlog of needed repairs and pushback from residents to pay for the needed improvements are well documented in reporting that has emerged since the collapse. Federal investigators are still assessing what might have specifically caused the building to collapse.
For its part, Miami-Dade County is floating the idea of requiring buildings to be “recertified” for life safety and structural integrity at 30-years after construction is completed, up from the current 40-year recertification that is on the books.
Champlain Towers South was just starting its 40-year recertification process when the tragedy struck.
Starting on Tuesday, January 11, the Florida Legislature will begin its 2022 session. The only bill filed that expressly mentions the Surfside condo collapse is a resolution by Miami’s Republican State Senator Ileana Garcia that would express “gratitude” to first responders who worked the disaster scene.
One bill filed by Miami Democrat Jason Pizzo would enact a broad list of condo reforms in the wake of the Surfside tragedy, though it does not mention the tragedy by name. That bill would require condo boards to build reserves for eventual repairs, require more frequent inspections, and would create an itemized list of things that inspectors would need to review. The bill, filed on January 10, has not received a hearing yet.
Another bill, filed by Palm Coast Republican State Senator Travis Hutson, would make it more difficult to sue a developer over construction defects that result in damages. That bill was filed as questions have been raised over whether the collapse of Champlain Towers was caused by construction defects.
One reform is already going into effect, although it is not technically at the government level. Both Fannie Mae and Freddie Mac, government-sponsored companies that have an outsized influence on the real estate market, are starting to require banks to collect a broad array of information about building maintenance records and needed repairs for new mortgages in buildings that have five or more units.
Due to the fact that both government sponsored companies buy massive amounts of loans directly from banks, the companies can essentially force banks to comply with the new rules and disclosures.
“This is gonna start to un-peel the dirty little secret of homeownership, and that is: In condominium and homeowner association communities — not just in South Florida, but nationwide — when folks buy in, they frequently don’t calculate what the real cost of continuing ownership is,” Michael Gelfand, West Palm Beach-based condo law attorney, told WLRN about the reform.
With all these various bills filed what reforms – if any – might Florida lawmakers actually push through and make into law?
Below is a conversation with Bill Sklar, who chaired the task force at the Florida Bar. He spoke with WLRN about what policy recommendations the task force is giving to Florida lawmakers.
The conversation has been lightly edited for clarity.
WLRN: One of the biggest challenges for condo owners and condo associations comes down to just the question of money, and specifically that repairs and maintenance are not cheap, but someone at the end of the day does have to foot the bill. But inside the buildings and inside condo associations, there's often resistance to spending the kind of money that might be needed to be responsible in the long term. So how do you imagine that this is something that can be addressed?
SKLAR: The misconception is people come here from all over the world to South Florida and throughout Florida, and it's a wonderful thing and they get a key. They pay for their condo and enter into a mortgage and they think it's all over. And they think they don't have to do anything. But they still have to pay for [repairs] just like a single family home.
We have mandatory reserves [for condo building repairs and maintenance] in Florida, but they are not significant enough as presently required. They're not robust. They're paltry.
They’re for re-paving, re-roofing and re-painting. And basically, that's it. And the rest is discretionary for items over $10,000.
So what we proposed are more robust reserves over a period of time. The basis of that would be inspection reports – credentialed inspections as a basis for those costs. And if they want to waive or reduce those amounts, we suggest a lending program through a bank, a line of credit or a government program.
We also suggested there may be infrastructure funds available. Infrastructure funds which would allow not free money, but a low or government guaranteed subsidized loan, which would make it very low interest money: one or two percent.
We know that the Champlain Towers South building in Surfside had multiple inspections in the lead up to the collapse last July. But is there some kind of way that the inspections can be done better? Maybe with more force, with more follow up from city, county or state officials?
First, there have to be standards for inspection. And we propose a thirteen point list that includes things like inspections of swimming pools, elevators and different parts of the structural integrity of the building.
And once that report is done, there has to be the duty of a board to release it to all the owners and provide a copy to the local building officials. We recommended in our report that within 10 days of such an inspection report, it must be furnished to every owner.
As far as disclosure, the Florida Association of Realtors agreed with us, and they want these inspection reports made available so sellers can disclose them as they should to their buyers. And I'm not suggesting sellers don't want to, they just don't have the reports. As I said, unit owners aren't getting the reports. There must be an obligation of the board to give those reports to owners, and quickly.
There is another issue going back to local government that's a concern, and it's a very sensitive issue to counties and cities: Local governments are protected if there is negligence in building inspections, and we suggest that the Legislature revisit this protection, given it's a disincentive to local governments to do more, and that is a problem.
And the way you imagine it, it would kick in if there's actual negligence.
In the world of condos and the way that those properties are managed, there’s a variety of potential conflicts of interest that come into play. For instance if a property management company decides that very expensive repairs should be done at the property, they can actually be fired by the board. And the board members themselves are often placed in a situation where they might have to take money out of their own pockets to address issues in the building, which maybe they don’t want to do. Or maybe they don’t want to make some tough decisions in order to stay on the good side of their neighbors, their fellow residents. Is there any way around that?
The way to deal with it is to have third-party professionals.
If you have a requirement every five years – as we have suggested – for a credentialed structural engineer to give a report, it’s not the management company saying “You have to spend money,” it’s an independent engineer. Independent of the board, independent of the manager. Don’t kill the messenger! By being done through a credentialed third party you take the blame away from the manager, you take the blame away from the board. So if the unit owner says “Why did you do this? Why did you find out we’re gonna have to spend $100,000 or $1 million?”
They can say: “We have no choice in the matter. We were following the new law.” And that’s why there needs to be a new law.
Unlike other classes of real estate – commercial, office buildings, schools, civic buildings – where you have third parties like lenders, investors, private equity companies which require inspections and maintenance protocols, in residential condos it’s all left to the discretion of volunteer, albeit well-intended boards of directors.
And I’m not in favor of regulation for regulation's sake, or any taxation or fees. That’s not what this is about. It’s about investing in one’s property like any other house or commercial property. It’s not just: “I paid for my condo, I got a key, I send in my assessment. See you later.” I wish it were that easy!
It’s the same maintenance that needs to be done in a house. Just on a larger scale.
Realistically, what do you think are the chances of any of these proposed reforms actually becoming law in the state of Florida right now?
I have been told by various members and staffers that there is a desire to have a bill. What its content will be, how far it will go in addressing the maintenance and reserves and inspection and transparency – I cannot honestly tell you today. I'd be merely speculating.