THE SPECIAL LEGISLATIVE SESSION BRINGS SOME MAJOR CHANGES FOR FLORIDA CONDOMINIUMS AND COOPERATIVES
Steven R. Braten, Shareholder
Paula C. Marra, Senior Associate
Michael H. Casanover, Senior Associate
In a swift move during a Special Session, the Florida Legislature introduced and then unanimously passed legislation to reform Florida’s Condominium and Cooperative Acts (the “Acts”). Governor DeSantis convened the Special Session for an entirely different purpose – to address the growing property and casualty insurance crisis in Florida. Lawmakers, stinging from criticism for not reaching agreement on condominium/cooperative reform legislation during the 2022 Regular Session, which was their first opportunity to pass such legislation following the Champlain Towers tragedy in Surfside, apparently continued working “behind the scenes” after the Regular Session ended. That effort has culminated in the form of Senate Bill 4-D, which passed the House and Senate by unanimous vote, and the Governor has signed the bill into law. The important highlights of the new laws under Chapters 718 and 719, Florida Statutes follow.
MANDATORY MILESTONE INSPECTIONS OF CONDOMINIUMS AND COOPERATIVES
All condominium and cooperative buildings that are at least three stories or more in height must conduct a “milestone inspection” by a Florida licensed architect or engineer by December 31st of the year the building reaches 30 years of age. The 30-year mark will be measured from when the building received its certificate of occupancy. Three stories or higher condominium and cooperative buildings located within 3 miles of a coastline, however, will have to conduct their milestone inspection by December 31st of the year the building reaches 25 years of age. For condominium and cooperative buildings whose certificates of occupancy were issued before July 1, 1992, will have until December 31, 2024 to perform the initial milestone inspection. Local enforcement agencies will be required to determine and notify condominium and cooperative associations if they require a milestone inspection, in which case the milestone inspection will need to be completed within 180 days of receipt of notice from the local enforcement agency.
Milestone inspections will consist of two phases: Phase one is a visual inspection of the structural components of the building, both habitable and non-habitable, by a licensed architect or engineer. Phase one of the milestone inspection will be mandatory. The architect or engineer will be required to issue a report to the local building enforcement agency whether the phase one inspection revealed substantial structural deterioration to any building components, in which case, phase two will need to be performed. If a phase two inspection is necessary, a phase two inspection will involve either destructive or nondestructive testing, or both, which will be at the discretion of the inspector’s direction.
At the conclusion of the inspection process, the inspector will be required to issue a signed and sealed report to the local inspection authority and the condominium or cooperative association, detailing the manner and type of inspection performed, identifying any substantial structural deterioration, and describe the extent of the deterioration. The milestone inspection report will be an official record under the new law, and once completed, associations will be required to distribute a copy of the inspector-prepared summary of the milestone inspection report to all unit owners. The summary will also have to be posted conspicuously on association property, and the full report will need to be posted on an association website, if that association is required to have one.
STRUCTURAL INTEGRITY RESERVE STUDIES
The other major reform, SB-4D, implements anticipated changes to how and when condominium and cooperatives conduct reserve studies. The new laws require condominiums and cooperatives to perform a structural integrity reserve study. Section 718.103 of the Condominium Act and Section 719.103 of the Cooperative Act are amended to add the definition of “structural integrity reserve study” 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. All condominiums will need to complete a structural integrity reserve study by December 31, 2024. Keep in mind, the study may be performed by any person qualified to perform such study; however, the visual inspection portion of the study must be performed by a licensed engineer or licensed architect. At a minimum, a structural integrity reserve study must identify the common areas being visually inspected, state the estimated remaining useful life and the estimated replacement cost or deferred maintenance expense of the common areas being visually inspected, and provide a recommended annual reserve amount that achieves the estimated replacement cost or deferred maintenance expense of each common area being visually inspected by the end of the estimated remaining useful life of each common area.
The Structural integrity reserve study will need to be kept in the official records for fifteen (15) years from the date of the report. It must also be kept on the website for all condominiums required to have a website.
If an association fails to complete a structural integrity reserve study, that failure constitutes a breach of an officer’s and director’s fiduciary relationship to the owners. Also, if the officers or directors of an association willfully and knowingly fail to have a milestone inspection performed, the failure constitutes a breach of the officers’ and directors’ fiduciary relationship to the owners. This may also significantly impact directors’ and officers’ liability insurance premiums, or trigger insurance carriers to require proof of compliance before issuing or renewing policies.
Before a developer may turn over a condominium or cooperative, the developer of any building that is 3 stories in height or higher must complete a structural integrity reserve study, and has this document available at turnover.
BUDGETING AND RESERVES
The amount to be reserved for required reserve items is determined by the most recent structural integrity reserve study. For all condominiums and cooperatives over 3 stories, line items must minimally include the roof, load bearing walls or other primary structural members, floor, foundation, fireproofing and fire protective systems, plumbing, electrical systems, waterproofing and exterior painting, windows, and any other item that has a deferred maintenance expense over $10,000.
Effective December 31, 2024, no unit owner-controlled condominium or cooperative will be permitted to vote to waive or partially fund the reserves. Condominiums and cooperatives must adequately fund reserves pursuant to the reserve study required. It is also prohibited to vote to use reserve for any other purpose for which they were intended. This applies to all condominiums and cooperatives, regardless of size or location.
NEW DEPARTMENT REGULATORY REQUIREMENTS
On or before January 1, 2023, condominiums and cooperatives that are in existence as of July 1, 2022 must provide the following to the Department of Business and Professional Regulation – Division of Condominiums, Timeshares, and Mobile Homes:
- The name of the Association;
- The total number of buildings that have 3 stories in height or higher;
- The total number of units in all such buildings;
- The counties in which the buildings are located and their physical address for each building.
If there are any changes to this information, it must be reported to the Division within six (6) months of any changes.
The Florida Department of Business and Professional Regulation – Division of Condominiums, Timeshares, and Mobile Homes has the power to enforce compliance for condominiums and cooperatives regarding completion of the milestone inspection reports, structural integrity reserve studies, and reserve funding.
WHAT DOES THIS ALL MEAN FOR YOUR ASSOCIATION?
These laws have been put in place to ensure that condominiums and cooperatives be maintained in such a way that all residents are kept safe and free from harm. For those associations who have been waiving or partially funding their reserves, this may mean some large financial increases. The 2.5-year grace period before waiving or partial funding of reserves expires gives boards time to plan for future assessments, but not much time, depending on how long your association has been underfunding reserves. The “bottom line” is all Florida condominiums and cooperatives need to begin planning now to be prepared for the December 31, 2024 deadline. If you have any questions regarding any of these legislative changes, we encourage you to contact your association’s attorney.