New FL Legislation Changes Rules on Some Condo Sales (Surfside: real estate, condominium)

[Sunshine Rules]

For those who may not have heard, Florida law now requires certain condominium associations and cooperatives (mainly those with 3 or more stories) to conduct a “milestone inspection” and “structural integrity reserve study” aimed to protect public health, safety, and welfare after the infamous Surfside condo collapse.


Effective as of March 20, 2023, all FL condo sales contracts must now include a condo rider that requires a seller provide a buyer, at the seller’s expense, a copy of any milestone inspection and structural integrity reserve study, if applicable and if available from the governing condo association.

So what is a milestone inspection? It must be completed by an appropriate Florida licensed engineer/architect

The inspection report must, among other things:
Identify any substantial structural deterioration and recommend repairs;
State whether unsafe or dangerous conditions are observed; and
Recommend any remedial or preventive repairs for damaged items that are not considered to be substantial structural deterioration.


Specifically, these inspections are required for condominium and cooperative buildings three stories or higher that have been (i) occupied for 30 years or more or (ii) occupied for 25 years or more and located within three miles of the Florida coastline. The inspection must be completed by December 31 of the year in which the building reaches 30 or 25 years of age, as applicable, and every ten years thereafter.


With the milestone inspection also comes the Structural Integrity Reserve Study.

The structural integrity reserve study is a study of reserve funds necessary for future major repairs of the common elements of a condominium or cooperative that are three stories or higher. The study must:
Identify the common areas being inspected;
State the estimated remaining useful life and estimate the replacement cost of the common areas being inspected; and
Provide a recommended annual reserve amount that achieves the estimated cost of replacement of such common areas by the end of the estimated remaining useful life.
The study must be completed at least every ten years.


Both the milestone inspection and structural integrity reserve study are to be paid for by the condo association.

Here's an interesting note: Architect/engineer who performed inspections must submit a sealed copy of the inspection report and findings to the association AND appropriate local building officials.


Here's the other big change as a result of this new legislation: RESERVES

Beginning in 2025, members of a unit owner-controlled condominium association may not elect to provide no reserves or less reserves than required for the following building components: (1) the roof; (2) load-bearing walls or other primary structural members; (3) floors; (4) the foundation; (5) fireproofing and fire protection systems; (6) plumbing; (7) electrical systems; (8) waterproofing and exterior painting; (9) windows; and (10) any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000 and the failure to replace or maintain such item negatively affects one or more of the components above, as determined by a licensed engineer or architect performing the visual inspection portion of the SIRS.

In the past condo associations had the option of collecting less than would be required for reserves if they wished to do so. Some condo associations took this option as a means of keeping monthly or quarterly maintenance fees lower. When they found themselves short on funds when a necessary repair was required, they would opt for special assessments to make up the difference.



The new legislation will definitely have an impact going forward on a number of condo communities in our local area.

The findings in the study will provide owners and potential buyers of condominium and cooperative units an idea as to future assessments they might be responsible for going forward if they buy in that particular community.

[treeboy919]

Great info, thanks for keeping us informed on the facts. Interesting that the language says "may not elect to provide" instead of "shall not elect"....rules should be clear in their intent use terms such as "shall" or "prohibit". Using the word "may" allows interpretation. Oh wait, I forgot FL is owned by lawyers :-)

[Sunshine Rules]

There's more..........

Loans may be impacted. Fannie & Freddie new guidelines provide that “loans secured by units in condo and co-op projects with significant deferred maintenance or in projects that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions are not eligible for purchase”. Meaning, if your community has more than five attached units, and has deferred maintenance Fannie Mae will not purchase or back any loans regardless of eligibility status.

There are also new guidelines relating to special assessments. Special assessments must be reviewed by the Lender including: the reason for the special assessment, the total amount of the special assessment and repayment terms, all documentation to support a determination that the special assessment does not impact the financial stability, viability, and condition, and marketability of the project, and how it impacts the borrower’s qualifications.

Fannie Mae is also requiring that condo boards set aside 10% of operating costs every month in a special reserve to pay for needed future repairs before it will back mortgages in condo communities. Plus, bankers will have to read through six months of condo board minutes to see if any discussions of maintenance or repair issues have come up, and will have to request copies of any engineering inspections conducted in the previous five years.

To qualify for loans, condo associations will have to answer detailed questionnaires about inspections, repairs, structural and mechanical issues and fees that have been assessed to pay for repairs.

Obviously older condo communities will be most impacted by the 2022 FL legislation.

FL condo communities that had formerly attempted to save money by performing short-term, spot repairs rather than making major repairs when needed, may no longer be able to do so and remain marketable to buyers wishing to obtain financing.

[Aquatique]

How do you predict this will affect prices for condos in 3+ story buildings vs condos in 1 or 2 level buildings, villas, and townhomes? Will prices drop for the condos in 3+ story buildings and prices go up for the other types of housing I mentioned? Might this type of legislation eventually apply to other attached units not in 3+ story buildings?

[Sunshine Rules]

Originally Posted by Aquatique

How do you predict this will affect prices for condos in 3+ story buildings vs condos in 1 or 2 level buildings, villas, and townhomes? Will prices drop for the condos in 3+ story buildings and prices go up for the other types of housing I mentioned? Might this type of legislation eventually apply to other attached units not in 3+ story buildings?

Regarding the Fannie & Freddie guideline changes, my understanding is those rules impact ALL condos, not just those 3 story buildings impacted by FL's 2022 legislation and not just in FL.

As to prices, right now there's not much impact on 3 story or other condos because a lot of buyers (and their agents) are either unaware of the 2022 legislation or haven't paid enough attention to the legislation.....yet.

Underfunded reserves have been a problem here in FL for years because the FL legislature allowed condo associations to underfund them without penalties. Unfortunately, often buyers pay little attention to the current budgets of the condo communities they are looking at but especially the Reserves portion of the budget. That is probably going to change going forward since Fannie Mae and Freddie Mac have gotten involved in demanding funded reserves.

2024 - 2025 is when I think you will start to see certain condo communities seeing prices impacted by the 2022 FL legislation because that's when the inspections and reports become mandatory for those units covered by the legislation.

As of December 31, 2024, FL condominium associations are prohibited from: (i) using reserves for a purpose other than as intended or reserved, (ii) waiving the reserves, or (iii) reducing the funding of reserves for certain structural components of the property.

Beginning in 2025, members of a unit owner-controlled FL condominium association may not elect to provide no reserves or less reserves than required for specific building components such as roofs, load-bearing walls, plumbing, etc.

Will inspections and reserves become mandatory for all FL condo communities? I don't know. However, even if those rules don't become mandatory for 1 and 2 story condo buildings, lenders and eventually buyers may force condo associations to comply in order for the condos to have marketability.

[tinytrump]

This is a good plan, especially by the coasts. Salt air erodes. Financially it’s getting to bee too much for some.

[asimegusta]

Now, Thanksgiving week 2023, the repercussions of these structural integrity and reserves requirements are becoming more known to real estate agents who are informing their client buyers about the new legislation and requesting sellers COAs provide a milestone report and a reserves study. It's a heads up to many COA presidents who are still unaware of these high impact changes.
If you are thinking of selling your condo, IMHO now is a good time, before a flood of condos come on the market, by owners unable to afford the new condo monthly fees which could be double what they now pay.

[MOforthewin]

How will this affect that silly Leonardo Arms on Ft. Myers Beach? A recent study said the structure isn't sound.

[WRM20]

Originally Posted by MOforthewin

How will this affect that silly Leonardo Arms on Ft. Myers Beach? A recent study said the structure isn't sound.

That looks like a building that should be demolished. IN fact, Ft Myers Beach should be deemed uninhabitable and returned to nature.

[beach43ofus]

Originally Posted by WRM20

That looks like a building that should be demolished. IN fact, Ft Myers Beach should be deemed uninhabitable and returned to nature.

ALL these high rise condo's along the beaches should be demolished. They are built upon shifting sands, and are vulnerable to Hurricane's high winds, and storm surge.

I dont think any structures should be built w/in 500 yards of the high tide level. They are a visual blight.