From Tragedy to Transformation

From Tragedy to Transformation

An Inside Look at the Future of Condominium Associations in Florida

By Adam Matyskiel / Published December 2023

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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 condominium 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 condominiums 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,” says 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 condominiums that are three stories or higher to do the following by December 31, 2024, with subsequent inspections every ten years after:

  • Conduct a milestone inspection on condominiums 30 years or older
  • Conduct a structural integrity reserve study
  • Aid in the procurement of loans for the funding of construction projects

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 with the new mandates.

The Solution: What Does This Mean for Florida Condominium Associations?

The new mandates set up by SB 4-D can be complicated for Florida associations to navigate, but with the right knowledge it can be stress-free. Many condominium 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 condominium 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 condominium 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 condominium 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 condominium 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 condominiums in Florida navigate the changing landscape brought about by this new law, it’s essential to have strategies to adapt to these new challenges. By planning and strategizing, condominium owners take control of the process and outcome for their condominium community. n

Adam Matyskiel

Senior Managing Director, Condominium Advisory Group

Adam Matyskiel is a seasoned multi-family housing executive with specialties in condominium services, repositioning, and deconversion. He graduated from St. Xavier University in Chicago in 1999 and began his career at American Invsco in 2000. He worked in their contract closing department and eventually became the assistant project manager of a 467-unit high-rise apartment conversion. In 2005 he joined Equity Residential’s condominium conversion division as a project manager and oversaw sales, marketing, construction, and financial modeling for several projects in suburban Chicago and Central Florida. Adam is a commissioner on the planning and zoning commission of his hometown, Geneva, Illinois. He currently serves as senior managing director for Condominium Advisory Group. Condominium Advisory Group.