The devastating collapse of one of the Champlain Towers South 12-story beachfront residential condominium towers in Surfside, Florida, has prompted officials at the local, state, and federal level to assess what precautions should be taken – or mandated – to prevent similar tragedies. At present, the cause of the collapse is still unknown.
In the wake of the collapse, however, a past engineering report has resurfaced which indicates that the tower had “major structural damage” as of October 2018. The same report concluded that the necessary repair work would be extremely expensive and create a significant disruption for residents. Whether the association acted upon this information reasonably will, unfortunately, be the source of litigation for months and years to come and has caused many condominium associations throughout the state to look in the mirror.
What are associations required to do to avoid a tragedy like Champlain Towers? What should associations do, even if not required by law?
Florida’s Condominium Act addresses engineering reports and warranties to be made by developers of a residential condominium, generally at the time of building or at such time that control of the association transitions to the members. However, there are few, if any, mandates at the state level as to a continued obligation to inspect the structural integrity of buildings. Politicians and residents throughout Florida have called on the state to enact mandatory requirements for building recertification, but Governor Ron DeSantis has not committed to any state action to that effect.
Through the efforts of advocacy groups and industry leaders such as CAI and Florida’s Real Property, Probate, Trust and Litigation Section, which has appointed a Condominium Law & Policy Life Safety Advisory Task Force, it is possible that future legislative sessions will see proposed laws aimed to prevent or minimize the likelihood of similar tragedies. In the absence of such legislation, though, condominium associations are guided primarily by local ordinances (to the extent they exist), and the business judgment of the board of directors.
At least two local municipalities have enacted requirements to impose mandatory recertifications of aged buildings. The County of Miami-Dade requires that a building must be recertified by an engineer or architect to ensure its structure and electrical safety (and each ten years thereafter). The County of Dade imposes similar requirements.
In counties where no such obligation is required, the decision to recertify a building or obtain an engineering report is left largely to the business judgment of the board of directors of the condominium association.
Contracting for a professional structural report
Some condominium associations throughout Florida have no doubt already called meetings to discuss hiring engineers and architects to inspect their buildings. The benefit of doing so is obvious: the board of directors and members cannot responsibly act on an impending problem if they are not aware it exists.
However, there are practical benefits of soliciting the help from building industry professionals. Depending on the terms of the contract with these vendors, the association may benefit from risk spreading with the engineers and architects that are retained. If the board of directors makes unilateral decisions for the association without proper professional input, it results in a massive liability to the association; however, the association can delegate some of that responsibility – and corresponding liability risk – to a professional engineer or architect who generally has insurance in place specifically to address assuming that risk.
Assessing the estimated remaining useful life of common elements through reserve studies
Mandatory reserve funding does require the board of directors to assess the “estimated remaining useful life and estimated replacement cost or deferred maintenance expense” of big-ticket items, including roof replacement, building repainting, pavement resurfacing, and any item that has a deferred maintenance expense or replacement cost exceeding $10,000.00.
The Condominium Act requires that associations have a formulaic basis, budgeted annually, for calculating reserves, but does not require a professional reserve study to be obtained. While not required, condominium associations would be well-advised to obtain reserve studies.
At the most simple level, obtaining a reserve study is beneficial to the board of directors because relying on a professional third party bolsters a business judgment defense for the association. However, it also allows a third party to take a closer look at the remaining useful life common elements. In compiling a reserve study, reserve analysts perform a component analysis, which involves inventorying common area components and researching the cost and useful life expectancy of common elements.
To be clear, the board of directors should not rely on a reserve study for information that needs to be obtained through an engineering or architectural report. However, a reserve study may expose urgent maintenance issues to the board, prompting it to enlist the assistance of appropriate industry professionals and further examine.
Regardless of how a condominium association responds to the Champlain Towers tragedy within its own operations, association members can and should expect to see increases in annual assessment charges, and possibly the levying of special assessments depending on the urgency of a proposed project. While the temptation to “kick the can” and keep assessment charges low or stable has short term appeal to members and sometimes directors, declining to raise assessments often catches up to the members in the form of a large special assessment.
While budget increases can cause frustration among members, they are often necessary for the sound operation of the association. After all, the boards of directors are trying to act in the best interest of the association of which they, too, are members.
Association boards needing assistance in this regard may contact me at email@example.com.