You might have heard about the tragic incident that occurred at Champlain Towers South in Surfside, Florida, on June 24, 2021. It's truly heartbreaking – the partial collapse of this 12-story beachfront condominium resulted in the loss of 98 lives. Investigations revealed design failures, shoddy construction, and neglect as contributing factors to the disaster. As a response, new laws have been implemented to prevent such tragedies in the future. Whether you currently live in a condo (even if selling isn't on your radar) or are considering buying one, understanding this new legislation is crucial.

New Condo Legislation

What you need to know

Recently, I attended a class at a local law firm to gain insights into these changes and asked plenty of questions to ensure I understood the implications fully. While I won't delve into all the technical details, I'll provide a solid overview of what you need to know – whether you're a current condo owner, thinking of selling, or considering a purchase. This information could potentially sway your decision on whether to buy or sell in the near future.

WHICH CONDOS ARE INCLUDED?

In this new legislation, it's important to note that not all condos will be affected. The law specifically targets buildings that are three stories or higher, which means that villas, certain townhomes, or two-story buildings may not fall under its jurisdiction. However, there are some gray areas in the language of the law, particularly when it comes to buildings with ground-floor parking. This ambiguity raises questions about whether such buildings are included or not. It's possible that some condo associations may choose to challenge the law moving forward.

MILESTONE INSPECTIONS

A milestone inspection is an essential aspect of ensuring the safety and structural integrity of condo buildings. Essentially, a milestone inspection report evaluates the adequacy of structural components for life safety purposes.

Any building with a Certificate of Occupancy (CO) dated before July 1, 1992, must undergo a milestone inspection by December 31, 2024. After that, the frequency of inspections varies based on the building's proximity to the coastline. If the building is within 3 miles of the coastline, inspections are required every 25 years. For buildings beyond this range, inspections are mandated every 30 years.

Now, let's break down the inspection process. It consists of two phases: Phase 1 involves a visual inspection to assess life safety and structural adequacy. If significant deterioration is observed during Phase 1, Phase 2 kicks in. This phase entails further testing and recommendations for repairing any damaged portions.

Milestone inspections must be conducted by qualified engineers and/or architects. Given the high stakes and liability involved, these professionals take their responsibilities seriously. If there's any uncertainty, they'll recommend moving to Phase 2 for more thorough assessment.

It's worth noting that the association is responsible for covering the costs of these inspections.

STRUCTURAL INTEGRITY RESERVE STUDY

Another important aspect of condo ownership: the Structural Integrity Reserve Study, or SIRS, which I'll refer to simply as the reserve study. This study is required for buildings that are three stories or higher and were constructed on or before July 1, 2022.

Essentially this study is a comprehensive examination of reserve funds earmarked for future major repairs and replacement of common areas within the building. This includes crucial components such as the roof, primary structural members, load-bearing walls, floors, foundation, plumbing, electrical systems, fireproofing, waterproofing, windows, and any items where the deferred maintenance expense exceeds $10,000.

 The reserve study serves multiple purposes:

1. It evaluates the estimated remaining useful life and replacement cost or deferred maintenance expense of these common area elements.

2. It provides a recommended annual reserve amount to ensure adequate funds are set aside for future repairs and replacements.

By conducting a reserve study, condo associations can proactively plan and budget for the upkeep and maintenance of their buildings, ultimately ensuring the long-term structural integrity and financial stability of the community. Stay tuned for more insights into how reserve studies impact condo associations and homeowners alike.

CONDOMINIUM RIDER CHANGES

When purchasing a condominium in Florida, it's crucial to be aware of a key rider or addendum that must be included in the transaction. This rider includes language stipulating that certain documents, once completed, are to be provided to the buyer. However, here's the catch: Condo associations are not required to have these documents completed until December 31, 2024.

These documents typically pertain to important matters such as milestone inspections, reserve studies, and other assessments related to the structural integrity and financial stability of the condominium community. While the language in the rider ensures that buyers will eventually receive these documents, it's essential to understand that the timeline for completion extends until the end of 2024.

As a prospective condo buyer, it's crucial to stay informed about these requirements and timelines to make informed decisions about your investment. Keep an eye out for updates and ensure that your real estate agent is well-versed in these matters to guide you through the process effectively.

THINGS TO KEEP IN MIND

Let's talk about the financial implications for condo associations in Florida as a result of these mandated reports. First and foremost, it's important to understand that the association is responsible for covering the costs of these reports, and let me tell you, they won't come cheap. If the funds aren't allocated in the budget to cover these expenses, brace yourself for a special assessment.

Many associations will find themselves needing these reports done within a relatively short timeframe. However, there may be challenges in finding enough engineers willing and able to conduct these inspections, given the liability involved. Even with associations making sincere efforts, meeting the December 31, 2024 deadline might prove challenging, especially if Phase 1 of the milestone inspection requires them to proceed to Phase 2.

Now, let's talk about the timing of providing these reports to buyers. While the condominium rider states that sellers only have to provide these reports prior to closing, I personally believe they should be given earlier on. What if the buyer is uncomfortable with the findings? This is something I may need to discuss with an attorney to ensure the best interests of all parties involved.

It's worth noting that given the recent nature of this legislation, very few associations will have these reports ready for buyers in the near future. However, some associations may have already conducted reserve studies. If an association lacks sufficient reserves, expect hefty special assessments and/or an increase in regular condo dues to quickly build up those reserves.

Now, let's talk about the importance of reserves. They're not just for minor repairs like fixing a broken treadmill or repairing mailboxes. They're primarily intended for major repairs and replacements of essential components within the condominium community. Neglecting maintenance over time can have serious consequences, as evidenced by the tragic collapse of the Surfside condo. Ultimately, having adequate reserves in place can help ensure the safety and stability of the community for years to come.

 FINAL THOUGHTS FOR BUYERS AND SELLERS

Buyers, it's crucial to carefully consider your budget when purchasing a condo, especially if the current unit price and regular condo dues are pushing your limits. If an increase in condo dues occurs, it could strain your finances beyond capacity. In such cases, it may be wise to explore alternative properties that better align with your budget constraints.

I understand the urgency of wanting to have those mandated studies in hand before making a purchase decision. However, it's essential to acknowledge that not all buildings will have completed these reports by the time you're ready to buy. This uncertainty means you must be prepared to assume some level of risk when purchasing a condo, knowing that dues may change, or structural issues could be revealed down the line.

For investors, this uncertain landscape may present opportunities for lucrative deals in the future. Keep an eye out for properties like Dolphin Towers, where potential bargains could arise. Just remember to conduct thorough due diligence and weigh the risks and rewards before making any investment decisions. With careful consideration and strategic planning, you can navigate the condo market with confidence and potentially capitalize on favorable opportunities.

Sellers, it's important to recognize that potential buyers may exhibit more hesitation when considering your condo until those mandated reports are available and they have a clearer understanding of what the condo dues will entail. Additionally, if there are numerous new or increased assessments looming, it could negatively impact the perceived value of your property in the eyes of buyers.

It's understandable that you may feel confident in the maintenance and upkeep of your building, and that's certainly a positive aspect. However, it's crucial to understand that buyers may not automatically share that confidence based solely on your assurance. In today's market, transparency and documentation carry significant weight, so it's essential to provide concrete evidence of your building's condition and financial health.

If you've been contemplating selling your condo, consider timing carefully. Spring 2023 could present an opportune moment to list your property when more information about the required reports and assessments may be available. Alternatively, you may opt to wait until the dust has settled and potential buyers feel more assured about the property's condition and financial stability. By strategizing your selling timeline effectively, you can maximize your chances of a successful sale in a competitive market.

CONCLUSION:

Indeed, it seems that we're entering a new phase in the condominium landscape, and this new normal will likely persist for some time. As I mentioned earlier, it may take a couple of years for the dust to settle and for operations to return to business as usual. However, it's worth noting that some condo associations may challenge the legislation, and there could be adjustments or refinements to the law in the future. But for now, we must navigate the current regulations and requirements as they stand.

In the description below, you'll find a link to a summary of the law, allowing you to review it in detail at your convenience. If you have any further questions or concerns, don't hesitate to reach out to me. While I'll do my best to address your inquiries, please understand that I won't attempt to interpret the law beyond my expertise. If necessary, I can connect you with an attorney who can provide more specialized assistance.

At the very least, I want to ensure that you're aware of this new legislation and its potential impact on your condo ownership journey. Let's stay informed and proactive as we navigate these changes together

Link to use in the description:

https://www.flsenate.gov/Committees/BillSummaries/2022D/html/2875