Live in a Florida Condo? New Law may impact Condo Reserves....Significantly (Miami: crawl space, buying)

[Futuremauian]

Something we are dealing with on the coast in Hawaii is the rise in sea level. Many buildings, including mine, have had to have expensive seawall repairs. Usually, a $million or several.

Each has required a special assessment since that is not typically included in reserves. For us it took years just to get approval from all of the agencies that had to sign off on it.

This is predicted to be a worldwide problem. Will it affect many condos in Florida?

[1insider]

An association who completes the new required inspection and study and realizes that they need an expensive concrete project within a few years (of which there are many) is going to have to drastically increase fees to meet the estimated cost by the time the work must be done. No longer can an association wait until repair time arrives and do a special assessment. Deferring concrete maintenance because it's expensive is also no longer an option and compliance for many unit owners will be super expensive. Anyone buying into an older building would be well-advised to favor those with recently completed concrete projects to those who have not. Owners of smaller units in associations with equal fees for all unit sizes are about to have even more reason to resent their neighbors in the bigger units.

"The new law includes a requirement for a “Structural integrity reserve study” for future major repairs and replacement of common areas based on visual inspection, this study must at a minimum identify the common areas being inspected, state the estimated remaining useful life and the estimated replacement cost or deferred maintenance expense and provide a recommended annual reserve amount that achieves the replacement cost by the end of the remaining useful life of the component."

[Trying941]

The new law is a good thing. Having been the president of two boards, I can state of my own personal experience that board members have a tendency to understate future expenses and defer repairs. At times it is their own economic situation and at times they do not want to have to deal with other residents and their complaints. But, it is never wise to kick the can down the road for a future board. The expenses will always have to be incurred and safety issues should not be ignored.
I see this actually helping sales, not hurting, in the long run. Purchasers can be more secure.

[beach43ofus]

These added costs are going to hurt condo sales, and values. It takes me totally out of the high-rise condo market, but I'd still consider a 2 story unit since they are not part of the new law.

I wonder if the Miami building that collapsed was a construction issue, or a maitenance issue? Did poor construction materials/practices cause the cracks that were not properly corrected? I wonder what the testimony has been in the lawsuits.

[Trying941]

Originally Posted by beach43ofus

These added costs are going to hurt condo sales, and values. It takes me totally out of the high-rise condo market, but I'd still consider a 2 story unit since they are not part of the new law.

I wonder if the Miami building that collapsed was a construction issue, or a maitenance issue? Did poor construction materials/practices cause the cracks that were not properly corrected? I wonder what the testimony has been in the lawsuits.

Yes, it was a construction issue that remediation would have corrected. The repair was necessary and known. The magnitude of the immediate danger was not.

[1insider]

Originally Posted by beach43ofus

These added costs are going to hurt condo sales, and values. It takes me totally out of the high-rise condo market, but I'd still consider a 2 story unit since they are not part of the new law.

I wonder if the Miami building that collapsed was a construction issue, or a maintenance issue? Did poor construction materials/practices cause the cracks that were not properly corrected? I wonder what the testimony has been in the lawsuits.

I agree. At the moment associations can procrastinate on structural maintenance and repair as we saw at Champlain Towers. I owned a unit in an old building needing repairs and the Board deliberately never discussed the obviously needed concrete repairs because no one wanted to pay for it and they didn't want a record of a discussion about it in the meeting minutes. If the Board hasn't been discussing repairs in Board meetings a buyer's review of documents won't reveal any upcoming surprises.

I have seen new buyers hit with a surprise $30,000 or higher special assessment within a year of closing. The new mandatory funding of structural reserves and concurrent higher fees will stop a lot of buyers. I might be able to justify today's asking price for a unit in a 40 year old building with $500 monthly fees but once those fees double, triple or more I, like many other buyers, would be pumping the brakes.

Champlain Towers was built right at the time that concrete formulation was rapidly evolving. Those high-rises built before the 80s of which there are a lot in Florida were built with concrete that wasn't as good as modern concrete. The formulations and types of concrete continue to change with modern concrete the best it's ever been. Even if Champlain Towers was built with the best concrete of the day it was inferior to 2000s concrete. For this reason I would never consider purchasing a unit in something built more than about 30 years ago, preferably much less.

I believe we can safely expect lower selling prices ahead for older buildings in 3 story and higher buildings which will probably pull down the rest of the condo market with it.

[beach43ofus]

Originally Posted by Trying941

Yes, it was a construction issue that remediation would have corrected. The repair was necessary and known. The magnitude of the immediate danger was not.

Since it was a construction issue, what steps has the state taken to improve the construction codes, & inspection processes? That seems to be the root cause.

I think hitting every condo building (3+ stories) in the state w/ much higher reserve requirements is overkill.

Just because 1 HOA board failed to act, thousands of others get penalized?

Did the Miami building collapse fall under any insurance policy?

Should there be a required insurance rider for buildings like these that could spread out the exposure?

I'm glad I decided not to buy a condo here. Seems to me that a lot of people are being forced to pay more for the negligence of a very few.

[1insider]

Originally Posted by beach43ofus

Since it was a construction issue, what steps has the state taken to improve the construction codes, & inspection processes? That seems to be the root cause.

I think hitting every condo building (3+ stories) in the state w/ much higher reserve requirements is overkill.

Just because 1 HOA board failed to act, thousands of others get penalized?

Did the Miami building collapse fall under any insurance policy?

Should there be a required insurance rider for buildings like these that could spread out the exposure?

I'm glad I decided not to buy a condo here. Seems to me that a lot of people are being forced to pay more for the negligence of a very few.

Really the only thing changed by the new law is when repairs costs are collected from the owners plus the additional inspections which is a good thing. The way it was before, Boards like the one at Champlain Towers South would put off repairs because of the expense just like a lot of other associations have been and are doing. Instead of waiting until the repairs start and doing a massive special assessment, condos will now be spreading that expense out over a long time.

Condo living has always been way more expensive than the fees alone suggest. Having a five figure special assessment every so often is reality in many buildings. Now they'll just have super high fees but no or lesser special assessments. Same cost in the long run. Old buildings are expensive to maintain and associations can no longer hide the true expense from prospective buyers.

[Trying941]

Originally Posted by beach43ofus

Since it was a construction issue, what steps has the state taken to improve the construction codes, & inspection processes? That seems to be the root cause.

I think hitting every condo building (3+ stories) in the state w/ much higher reserve requirements is overkill.

Just because 1 HOA board failed to act, thousands of others get penalized?

Did the Miami building collapse fall under any insurance policy?

Should there be a required insurance rider for buildings like these that could spread out the exposure?

I'm glad I decided not to buy a condo here. Seems to me that a lot of people are being forced to pay more for the negligence of a very few.

I agree with the prior poster - this does not change the amount of money a condo needs to spend. It makes the condo collect in a more open and transparent manner, and prevents abuses and disasters. I generally dislike regulations, but this is a good one. Board members all too often act in self-interest and not in the best interest of their community - or are not wise enough to deal with repairs in a timely manner.

I noted previously I was the president of two boards. I hired engineering firms, had reports prepared, did five year plans and had special assessments each time I became president. People who were selling hated it, as their prices dropped. But, those that stayed loved it. And the cost of repair fell upon those who enjoyed the property while it deteriorated - in other words where it belonged and not on unsuspecting new purchasers. As a side benefit, we were all safer.

[beach43ofus]

Originally Posted by Trying941

I agree with the prior poster - this does not change the amount of money a condo needs to spend. It makes the condo collect in a more open and transparent manner, and prevents abuses and disasters. I generally dislike regulations, but this is a good one. Board members all too often act in self-interest and not in the best interest of their community - or are not wise enough to deal with repairs in a timely manner.

I noted previously I was the president of two boards. I hired engineering firms, had reports prepared, did five year plans and had special assessments each time I became president. People who were selling hated it, as their prices dropped. But, those that stayed loved it. And the cost of repair fell upon those who enjoyed the property while it deteriorated - in other words where it belonged and not on unsuspecting new purchasers. As a side benefit, we were all safer.

I've been an HOA President in a condo complex (in GA), but they were all 2 story w/ frame construction over crawl space, so very few concrete issues to deal with. We did have settling I had to hire an engineering firm to assess, then had to hire a contractor to add supporting piers under the buildings in the crawl space to remedy. I've been through it before...not w/ concrete...other than footers.

I'd have to go back to read more on this story, & the FLA, Dade, & Miami existing codes/laws to dig deeper. I no longer own a condo, so I won't bother.

I do know that the laws in place when the Miami building collapsed only required inspections once every 10 years. That interval, & the perscribed follow-up, turned out to be inadequate. A simple change to do inspections more frequently is the path I'd have taken. More inspectors would need to be hired, & a special property tax fee could be added to high rise condo's to pay for them.

If inspectors found a safety issue, & the HOA Board failed to act, the city/county/state could condemn the building for safety's sake.

I still see the remedy they chose, to be an over reaction to an isolated incidence, & unintended consequences could arise that winds up costing property owners more instead of less for the same level of safety. Let's see how this new law impacts condo values, & days on market in the future.