By Anthony L. Emma, Jr., CAM / Published June 2023
Florida Administrative Code (FAC) Rule 61B-22.005 mandates that condominium associations must complete a reserve study, and such a report must include a reserve schedule that details the estimated remaining useful life of each structural component, the estimated cost of repair or replacement, and the amount of funds that must be reserved to cover these costs.
As a result of several structural integrity issues identified throughout the state, including the tragic Surfside Condominium collapse that resulted in 98 deaths in 2021, the Florida legislature passed Senate Bill 4-D requiring condominium/cooperative association structural integrity reserve studies (SIRS) into law on May 26, 2022. A SIRS is an evaluation of the current condition and future maintenance needs of certain building structures in Florida. This type of study is typically conducted by licensed engineers or architects and is commonly used for condominiums, apartments, and other multi-unit residential and commercial buildings.
The purpose of a SIRS is to identify potential or existing structural problems that could lead to significant maintenance or repair costs in the future. This inspection includes assessing the condition of the building’s foundation, roof, exterior walls, balconies, and other structural components. Additionally, there are considerations for the useful life of these components for funding reserves.
There are two independent inspections required in this process: the milestone inspection and the independent reserve study. The milestone inspection must be performed by a licensed architect or engineer and include an independent review of the property and a physical, non-invasive inspection. These inspections typically include a percentage of the units and common areas to identify certain deferred maintenance items or larger concerns in the structural integrity of the building(s). The results of this inspection may identify certain areas of deferred maintenance, or for those properties that may have significant signs of deterioration, a Phase II inspection may be recommended. Phase II would be a more comprehensive inspection of the components of a building or units.
The second component to the SIRS process is a comprehensive reserve study. This study in most cases should be performed by an engineer, architect, or a registered reserve specialist. The study would include all the components required under the SIRS guidelines and a financial analysis of each component, including age, useful life, replacement costs, and mitigating factors for the determining the timeframe for these replacements. This analysis would also provide a basis for funding the reserves, which must be fully funded.
The following are requirements of this new law:
Failure to obtain a SIRS is a breach of the officers’ and directors’ fiduciary responsibility to the owners. SIRS also requires the developer to have a SIRS completed for each three-story or higher association building prior to turning over control to the unit owners. Associations cannot borrow against SIRS reserves for any other purposes.
Associations will no longer be permitted to waive, reduce, or use the reserves for another purpose for those items required in the SIRS, even if a majority of the owners want to vote to do so.
All associations must create and maintain a separate SIRS reserve budget in addition to their regular reserve fund. Items on the SIRS reserve budget must include the following: roofs, plumbing, electrical systems, load-bearing walls or other primary structural members, floors, foundations, fireproofing & fire protection systems, waterproofing, exterior painting, windows, and any other item(s) for which the replacement or repair costs exceed $10,000, and the failure to replace or maintain the item(s) will negatively affect the other SIRS reserve budget items as determined by a Florida licensed engineer or architect.
The Florida Department of Business and Professional Regulation (DBPR) and local enforcement agencies have the power to enforce compliance regarding the completion of the SIRS inspection reports, studies, and SIRS reserve funding. Counties may also require that a condominium or cooperative association schedule or commence repairs for structural deficiencies within a specific timeframe. If an association fails to submit proof that repairs are underway to the enforcement agencies, the agencies must review and determine if the building is unsafe for human occupancy. Indeed, over the last several months agencies have ordered the evacuation of several buildings throughout the state due to dangerous structural conditions.
The Florida legislature is still reviewing additional SIRS requirements and clarifications; however, nothing has been passed to date*.
In summary, a structural integrity reserve study is an important tool for building owners and condominium associations to manage their property and ensure the long-term structural integrity of their buildings in Florida. It provides valuable information that can help them plan for future maintenance and repairs and allocate funds accordingly. Additionally, it provides unit owners with a peace of mind regarding the integrity of their building structure and protects their ongoing investment.
*Please note that this information is up to date at the time of publishing, which comes a week before the legislature is scheduled to convene.
Anthony L. Emma, Jr., CAM
CEO, Element Financial Solutions
Anthony L. Emma, Jr., CAM, is CEO of Element Financial Solutions, a full-service financial and accounting, and residential property management firm. Anthony earned a bachelor’s degree in finance from Bryant University and also obtained a community association management license (CAM) as well as a certified general contractor’s license in the State of Florida. Element has extensive knowledge and experience of property management processes, investment services, facilities management, construction, and appraisal and valuation services.
Element understands the distinct characteristics of association and property management. Licensures and designations underscore the team’s comprehensive grasp of the regulations and statutes governing associations. For more information, call 239-315-7000, email firstname.lastname@example.org, or visit ElementFinancialSolutions.com.