Condo Owners and Associations Bracing for Impact

Ask condo lawyer Eric Glazer about the biggest problem with the Florida condo mindset, and he gives this answer:

“Picture getting together with a group of friends at a restaurant and each one lives in a different condominium. The ‘winner’ at the table has the cheapest condo assessment – $100 cheaper than the runner-up. But the winner is living a lie, and the Florida Legislature has given condo owners and associations enough rope to hang themselves.”

That has changed.

In the late May Florida Legislature special session, lawmakers finally broke decades of laxity and inaction. In a rare show of bipartisan unanimity amid ginned-up “culture wars,” the Senate and House overwhelmingly passed the biggest overhaul of Florida condo law in at least two decades, just in time for the June 24 anniversary of the Champlain Towers South collapse, which cost 98 lives. At press time, the bill was headed to the desk of Gov. Ron DeSantis, who has signaled support.

Momentum had built since the Surfside tragedy, with a Florida Bar Task Force in October, a Miami-Dade County Grand Jury Report in December and a strengthened county condo ordinance moving ahead in May.

The Senate and House laid much of bipartisan groundwork for the bill in the regular session, but the effort was stillborn amid procedural jousting and missteps, and the Legislature adjourned two days early in March.

This time, things were different, and both bodies moved fast.

Urgency is in the air for condo owners and associations, with property insurance rates up 50-100%, a jittery economy and looming mandates, mostly scheduled to phase in over the next 2 1/2 years. Many condo owners and renters on fixed incomes are ill-prepared to pay the inevitable rising assessments.

Said Glazer, a partner at Fort Lauderdale law firm Glazer & Sachs and host of the Florida HOA & Condo blog and a weekly WFTL-850 radio show: “With inflation, it’s a choice between food and gas. Food wins.”

Condo owners and associations are a huge constituency in Florida. More than 27,000 condo associations represent owners of 1.52 million condominiums with nearly 3 million residents. Nearly 1 million of those units are at least 30 years old, housing 2 million residents.

The revisions of Florida Statute Chapter 718 governing condominiums would, among other things, do the following:

·     Require inspections after the first 25 years (rather than the current 40) and every 10 years thereafter for condos three stories and above within 3 miles of the coast – or most of Biscayne Times territory, and after 30 years for condos three stories and up elsewhere.

·     Require inspections to be completed by Dec. 31, 2024, for condos occupied before July 1, 1992.

·     Prohibit waiving reserve requirements to pay for routine or additional maintenance and repairs.

·     Make inspection records available to unit owners, renters and associations.

·     Require a two-phase engineers’ inspection for structural deterioration.

·     Require developers to fund reserves before handing control to condo associations, and open board members who ignore inspection requirements to lawsuits.

Coming Shocks

Glazer has been sounding the alarm since 2018. He has warned his clients and the public that higher foreclosure rates, mandated reserve requirements and increased taxes will likely hit condo associations and municipalities sooner rather than later.

An agent for condo associations, he shared that process servers are already showing up with increasing frequency at his office, foreshadowing more foreclosures and suggesting that a violent swing in the South Florida real estate pendulum has already begun.

Glazer also says that by January 1, 2024, every condominium of six stories or more will be required to have either fire sprinklers or an emergency life safety system.

Rafael Aquino of Affinity Management Services of Doral, an adviser to condo associations, urges that associations take the following five steps: get tough on collections now before recession hits; introduce a bad debit line item in upcoming 2023 budgets; put a minimum of 10% of the operating budget into a reserves fund if the association doesn’t have one already; pay workers a minimum of $15 an hour so they don’t bolt; and start communicating with unit owners as often as possible to cushion against coming shocks.

The marketplace is already doing some of the work, with tightened underwriting and insurance requirements through Freddie Mac and Fannie Mae, increased attention from ratings agencies and the reinsurance market, and closer questioning from banks to associations about reserves.

Whatever happens, Glazer says, it is past time for condo boards to get ready.

Amplifying his urgings and those of Aquino’s, State Sen. Jason Pizzo, D-Sunny Isles Beach, says there’s nothing to preclude any condo board for instituting its own safety and financial requirements.

The former state prosecutor speaks with a certain authority. Not only is he a co-sponsor of the greatest number of recent bills for tougher statewide condo laws, he says he’s the only one of 40 sitting senators with a condo as his primary residence. His family has been in the multifamily home business in New Jersey since the 1980s.

Condo owners and associations are a huge constituency in Florida. More than 27,000 condo associations represent 1.52 million condominiums with nearly 3 million residents. Nearly 1 million of those units are at least 30 years old, housing 2 million residents.

In a taste of what may come, North Miami Beach ordered the evacuation of the Crestview Towers condo located at 2025 NE 164th St. last July, citing structural and electrical problems. The property, still unoccupied, is proceeding with electrical and structural repairs. Bayview 60 Homes, an apartment building located at 3800 NE 168th St. suffering foundational problems, was also evacuated by the city in April of this year. It’s slated for demolition.

Pizzo represents Surfside and was at the Champlain Towers South site every day after the collapse. He has pushed for more stringent condo regulation since taking office in 2019.

Grim Reality

Buyers, occupants, boards and lawmakers should regard condos as communal, interdependent organisms beholden to a governing board, distinct from single-family homes, says Pizzo.

“The analogy is: How do you take care of your body?” he said. “Consider a building a breathing, living animal. It’s not static. It’s not in a vacuum. It’s not abstract. It literally ages and sometimes accelerates its age based on its geography … A building near saltwater with a high water table is akin to a human living next to a high-polluted area. It’s no different.”

In advancing this mindset, Aquino, Glazer and Pizzo suggest the following questions for any condo buyer, owner or association:

Ask the right questions. What’s the history of condo assessments? What are the current special assessments, if any, and what work is contemplated? If dues haven’t increased for a significant period of time, they may be artificially low and ripe for an eye-popping boost upon a property inspection. What is the insurance policy for your complex? What are the exclusions? How do they compare with best practices? What is the age of the roof and its actuarial life expectancy? How diligent and informed is the building manager?

Insist on a micro-focused exam of your unit and building. Ask for copies of the most recent building inspections and get the best inspector you can find to assess your unit. That means thorough testing for mold and particulates in the walls and air ducts.

What are your reserves? The more your association sets aside, the better you can sleep. As the law has stood, a simple majority of a quorum can vote to waive reserves. Under the bill just passed, there is no option to waive reserves after Dec. 31, 2024.

Require Florida Condominium Association education for every board member. The state does not mandate this, but requires signing a form that Glazer calls “dumb, stupid and self-serving.” Glazer, Aquino and Pizzo argue that every board member needs to take the three-hour course on Statute 718 in a way that is monitored, proctored and accountable.

“If you don’t have time to take a three-hour course on Zoom,” said Aquino, “then what are you doing sitting on a condo board of directors?”

He added that executing and administering the law will likely involve a messy process, and possible legislative revision.

“There will be a lot of cleanup in the next few years,” he said. “This is the accumulation of years of things not being done. That’s the reality.”