By Michael J. Gelfand, Esq. / Published August 2022
Editor’s Note: This is a two-part series. You can read Part 1 in the July issue or visit at www.fcapgroup.com. Part one discussed milestone inspections, what steps must be taken once those reports are received, and who should see them as legislated in SB 4-D that Governor DeSantis signed into law on May 26, 2022. What continues below is further discussion from SB 4-D.
Money is the blood of action. As the Florida Bar’s Condominium Life Safety Task Force reported, the lack of funds undermined many associations’ ability to undertake repairs. The waiver or reduction of reserve funding was a primary cause of this fault.
Thus, as an initial step or toe forward, the new law requires condominium and cooperative associations three stories or higher to obtain a “structural integrity reserve study.” This study is defined as
… a study of the reserve funds required for future major repairs and replacement of the common areas based on a visual inspection of the common areas.
The visual inspection portion of the structural integrity reserve study must be performed by a Florida licensed engineer or architect. What is the deadline for this structural integrity reserve study? It is December 31, 2024.
What must the study report include? At a minimum, a structural integrity reserve study must include the following:
§718.103(25). The components to be inspected include:
On and after December 31, 2024, condominium and cooperative associations three stories or higher may not vote to provide for no reserves (no waiver!) or less than required reserves or to vote to use reserves for another purpose as it relates to reserves identified in the structural integrity reserve study (§718.112(2)(f)2). Reports must be updated every ten years (§718.112(2)(2)).
The failure to obtain a structural integrity reserve study or to complete a mandatory milestone inspection by December 31, 2024, is stated as constituting a breach of officers’ and directors’ fiduciary relationship to the owners. That likely was included in the law as the potential of litigation against volunteer officers and directors will be another indirect pressure to comply.
In a further effort to indirectly pressure associations to act in a timely manner, reports are to be kept as association official records for at least 15 years after receipt of the report. A prospective buyer of a condominium unit is entitled to obtain copies of other condominium documents and financial information, the inspector-prepared summary of the milestone inspection report, and the most recent structural integrity reserve study (§718.503; §718.504). Interestingly, a renter of a unit has a right to inspect and copy the inspection reports (§718.111(12)(c); (§719.104(2)(a)(15)).
The Division of Condominiums is the delegated enforcement authority concerning the “procedural completion” of milestone inspections and structural reserve studies (§718.501; §719.501). At the beginning of 2023, condominium and cooperative associations three stories or higher must provide a report to the Division of Condominiums on a form to be created by the Division identifying threshold information for milestone inspection reports and thereafter update the information (§718.503(3)(a); §719.503(3)(a)).
This is likely the most significant condominium association related legislation in quite some time. The speed of its passage is not necessarily positive as incongruities in the text are being identified.
Condominium and cooperative associations should be prepared to quickly implement these provisions, especially for associations that are required to undertake reports and to retain engineers or architects.
A number of older associations will be facing significant repair issues. Will it be financially justified to undertake extensive repairs? Some may reconsider whether to terminate the condominium and sell! Realizing the actual expense of Florida unit ownership may be an unanticipated consequence of this situation.
Also, this new law does not alleviate the responsibility of associations to address issues that may prevent loans from being available from Fannie Mae and Freddie Mac. In an earlier edition we reported on how the private financing sector has filled the void where the legislature had not stepped in, seeking to require associations to complete financing questionnaires that may result in no loans being made for units in a building.
Please note that statutory citations to Chapter 718 are only for condominium associations.
Michael J. Gelfand, Esq.
Senior Partner, Gelfand & Arpe, P.A.
Michael J. Gelfand, Esq., the senior partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a dual Florida Bar board certified lawyer in condominium and planned development law and in real estate law, a certified circuit and county civil court mediator, a homeowners association mediator, an arbitrator, and parliamentarian. He is a past chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at email@example.com or (561) 655-6224.