Contributing Factors to Condo Terminations - A Blog Series
On June 9, 2023, Governor DeSantis signed Senate Bill 154 (“SB 154”) into law. This was the highly anticipated “glitch bill” to address technical issues with Senate Bill 4-D (“SB 4-D”) - last year’s controversial legislation in response to the collapse of Champlain Towers South. While SB 154 improves upon its predecessor in some respects, it leaves in place the substantive changes to Chapter 718 that, for many, will make condominium ownership more expensive. These changes are the milestone inspections, structural integrity reserve studies (“SIRS”), and increased reserve requirements.
The concept of a milestone inspection is that once a condominium reaches a certain age, the association is required to visually inspect all buildings, three stories or more, for substantial structural deterioration. If any is detected, the association must perform testing and/or repairs. SB-4D set the initial deadline for milestone inspections as December 31, 2024, or by the end of the year in which the condominium turns 25 or 30 years old, depending on its vicinity to the coastline. According to some reports, this instantly triggered the inspection requirement for over 20,000 condominiums across the state.
Compliance by December 31, 2024, however, was unrealistic or impossible under SB 4-D. For example, milestone inspections had to be performed directly by a limited pool of licensed architects or engineers. In addition, the 25-year deadline for certain coastal condominiums had already passed, or the method of computation caused the inspection outside date to be sooner than the end of 2024. SB 4-D also permitted local enforcement agencies to send compliance notices, but it was unclear whether the notices would effectively shorten or extend the statutory deadlines. To say the least, there were numerous concerns with the feasibility and implementation of the milestone inspection requirements.
SB 154 attempted to address these concerns. First, milestone inspections can now be performed by a “team of professionals” working under a licensed architect or engineer. This was intended to increase the available manpower to perform milestone inspections. Next, the initial deadline for condominiums reaching 30 years old between July 1, 2022 and December 31, 2024, was extended to December 31, 2025. This addressed the deadlines that had already passed, or those with outside dates sooner than December 31, 2024. SB 154 also removed the strict 25-year deadline for coastal condominiums, and instead, authorized local enforcement agencies to impose a 25-year deadline for any applicable condominium because of local circumstances, such as the proximity to saltwater. In addition, SB 154 revised the notice procedure for local enforcement agencies, which can now extend the milestone inspection deadline for a condominium that shows good cause (e.g., a pending contract for a milestone inspection that cannot be reasonably completed by the deadline).
The second substantive change is the SIRS. Like the milestone inspection, the SIRS involves a visual examination of certain building components deemed critical to structural soundness and safety. Its purpose is to determine an annual reserve amount that achieves the estimated replacement or deferred maintenance cost for the components, by the end of their useful lives. Condominiums must then incorporate those amounts into their annual budgets, meaning associations can no longer waive reserves for the specific SIRS components. SB 4-D also set the initial SIRS deadline as December 31, 2024, for condominium associations existing on or before July 1, 2022.
A major concern with SB 4-D was that the SIRS components included load-bearing walls, floors, and foundations. Performing a visual inspection of these items, however, may be difficult or practically impossible without significant destructive work. The original list of SIRS components also included windows, but condominium associations typically only maintain windows if they are included as common elements (i.e., not windows deemed part of the units). Additionally, SB 4-D was unclear as to when annual budgets must start including reserves for SIRS components despite the initial deadline to have a SIRS report completed. Again, there were also numerous concerns with the feasibility and implementation of the SIRS.
SB 154 attempted to address these as well. For example, floors and foundations were removed from the list of SIRS components, and “load-bearing walls” was replaced with: “structure, including load-bearing walls . . . and primary structural systems as those terms are defined in s.627.706.” In addition, windows are now accompanied by “exterior doors,” along with clarification that the SIRS requirement only applies to components maintained by the association. SB 154 also authorized those performing the SIRS to determine that no reserves are required for certain components with an estimated useful life greater than 25 years - or the SIRS may recommend a deferred maintenance expense for such components. Either way, this was intended to address “structure” or any other SIRS component that may be difficult or impossible to inspect. Finally, the mandatory reserve requirement was clarified to apply to any budget adopted on or after December 31, 2024, meaning one adopted beforehand is the last time a unit owner-controlled condominium association can provide no reserves or less reserves than required by the SIRS.
It is important to note that there are many additional aspects to SB 4-D that continue to remain in place. Furthermore, SB 154 includes new provisions that were not originally part of SB 4-D. It will thus take some time to reconcile both bills to understand the full impact on condominiums going forward. But the general takeaway from this “glitch bill” is that milestone inspections, SIRS, and increased reserve requirements are here to stay.