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The firm’s latest Miami Herald “Real Estate Counselor” column was authored by shareholder Gary M. Mars. The article, which is titled “State’s Lawmakers Enact Major Changes to Address Condo Affordability,” focuses on the changes to take place under House Bill 913, which unanimously passed both chambers of the legislature and went into effect on July 1 upon gubernatorial approval. The bill enacts far-reaching changes that will provide relief for some condominium associations. Gary’s article reads:
. . . While it would not be possible to discuss all of the changes in the 191-page bill in this column, those addressing the mandates for reserve studies and funding are particularly impactful. The deadline for the completion of the Structural Integrity Reserves Study required for condominiums existing on or before July 1, 2022, was extended by one year to December 31, 2025. Plus, the SIRS and milestone inspection requirements will only apply to buildings with three or more habitable stories, so parking decks at the base of buildings will no longer apply toward the threshold.
Associations will be allowed to meet their reserve funding requirements by taking out loans and lines of credit from lenders with owner approval. However, that privilege should only be considered by associations that have fallen far behind and must immediately begin paying large sums for looming replacements of expensive structural items such as roofs and windows. The last thing associations in difficult financial straits should do is dig themselves into an even deeper hole with interest payments for such financing.
Rather than paying interest to lenders for their reserves, the new law allows associations to earn interest by enabling directors to use their best efforts to make prudent investment decisions that carefully consider risk and return. They may invest reserve funds in one or any combination of certificates of deposit or depository accounts without a vote of the unit owners.
For association budgets adopted on or before December 31, 2028, those that have completed a required milestone inspection within the previous two calendar years will be allowed to pause or reduce their reserve fund contributions for up to the next two consecutive annual budgets if approved by a majority of the total voting interests. They will then need a new reserve study before the eventual continuation of reserve contributions in order to determine the exact needs and develop a funding plan. This change is designed to enable associations to focus on funding immediate repairs identified by milestone inspections rather than work that remains years away.
Another change to help make reserves more affordable involves the threshold repair/replacement costs for the items requiring reserve funding. Rather than requiring reserves for items costing $10,000 or more, condominium associations will only be required to fund reserves for items costing more than $25,000.
Important changes involving the use of virtual meetings are also included. Online meetings must be recorded and maintained as part of associations’ official records for at least one year, and those with required websites must post such recordings as well as all meeting minutes within 30 days and keep them posted for 12 months. Meeting notices must include virtual access links and call-in numbers as well as information on the meeting’s physical location for those who wish to attend in person.
The use of electronic voting also gets a boost. Resolutions to adopt e-voting will be permissible at regular board meetings with only 48-hour posted advance notice, rather than being reserved only for special meetings with 14-day advance notices that are both mailed to all the unit owners and posted. Associations in which 25 percent of the unit-owner members sign a petition requesting e-voting must implement it within 21 days. Also, those communities that have not yet implemented e-voting must accept ballots that have been submitted electronically if they otherwise comply with applicable laws.
Buyers of condominium residences will also benefit from some of the provisions. Sellers, including the developers of new enclaves, must provide prospective buyers with the most recent association annual budget and financial statements. Additionally, sales contracts must include clear statements about the status of inspections and reserves, and associations’ official records are expanded to include bank statements, ledgers, affidavits, and meeting minutes.
Vendor conflicts of interest are also addressed. Contractors, architects and engineers who bid on milestone inspections and structural-integrity studies must disclose in writing to associations if they also intend to bid on related maintenance, repairs or replacements. Disclosure failures make contracts voidable and subject professionals to discipline.
As to condominium insurance, the previous requirement for coverage of “full insurable value, replacement cost, or similar coverage” has been refined. The new legislation calls for coverage determinations that are based on the replacement cost of the property established by an independent insurance appraisal or an updated prior appraisal. That replacement cost must be determined at least once every three years. . .
Gary concludes his article by noting that these and other changes under HB 913 will benefit many Florida condominium associations, which should consult with highly qualified attorneys regarding how the provisions will impact their communities. He writes that board members and unit owners have been calling for legislative relief to address the brewing crisis caused by rapidly growing budgets to meet the new state requirements and rising insurance costs, and the lawmakers delivered with a comprehensive bill that impacts a wide range of the financial pressures facing associations. Gary also notes that while the state and its Department of Business and Professional Regulation will need to provide some additional input on the implementation of some of the measures, association leaders should now take the initiative to read the complete bill and become familiar with all of its stipulations.
Our firm salutes Gary for sharing his insights on some of the key provisions of this new legislation with the readers of the Miami Herald. He and the firm’s other South Florida community association attorneys write about important matters for associations in this blog and our Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles.