Living in a Florida high-rise? Here’s how to meet new deadlines for condo reserves
Condos have new financial requirements, and homeowners could feel it in the wallet.
Florida is requiring all condo associations with three-story buildings or higher to file an inspection report that focuses on different parts of a building and the expected cost to renovate or maintain them.
The structural integrity reserve study is due by Dec. 31, and then every 10 years, said Carolina Sheir, partner at Hollywood-based Eisinger Law.
The law also requires condo owners to save up and contribute every month to their association’s reserves — think of it as a savings account — to meet anticipated changes. That means owners can expect even higher costs in addition to their rising monthly association fees and assessments.
“You want to think about reserves as forced financial planning. The purpose of the reserve is buildings are going to age. The idea is you put enough money aside for these components so once they age you have money in the piggy bank to replace them. We’ve always had that. That’s nothing new,” Sheir said. “But the culture and the trend is that people didn’t want high assessments. They would waive reserves or partially waive reserves.”
The change comes after the collapse of the Champlain Towers South in Surfside, which killed 98 people in June 2021. The building needed repairs, but owners at Champlain waived reserves to the point where they failed to have sufficient funds to start repairs on time.
Now, the state will prohibit waivers and require communities to fund repairs.
Here are the steps to meet the upcoming deadlines:
Commission a study
▪ Step 1: Condo associations must commission a structural integrity reserve study.
Update the condo budget
▪ Step 2: Once the inspector returns the report, the condo association must adjust the budget. The budget has to account for monthly contributions toward a reserve sufficient to pay for renovations and upgrades every 15 to 25 years.
Notify owners and file with the state
▪ Step 3: The next phase happens in two steps. The association must notify and share with every owner the inspector’s structural integrity reserve study and the revised budget. If the association has a website, it must post the report online. At the same time, the association must file the report to the Florida Department of Business and Professional Regulation. Both steps must be completed within 45 days.
Contribute to the reserves
▪ Step 4: Now comes reserve contributions. For budgets adopted on or after Dec. 31, condo associations that have a structural integrity reserve study must start reserve contributions in 2025. That’s in an ideal world, Sheir said, but reality differs for many associations. For those stuck on a waiting list with an inspector, in the process of an inspection, planning to complete their milestone inspection in 2026 or simply desiring to reduce the expected reserve amount, Sheir said, there’s a process to waive payments one last time.
Before Dec. 31, the association would have to call a vote and gain the approval of a majority of all owners to waive until 2026. So, for example, if a condominium has 100 condos, the association needs 51 owners to waive the contribution requirements. Owners must receive notice of a membership meeting to vote on the waiver of reserves at least 14 days in advance, and the vote — and decision to waive — must be recorded in the minutes of the meeting.
It may be tempting to forgo reserve contributions. Condo owners face zero penalties from the state, at least for now. State Rep. Vicki Lopez, R-Miami, said during a Miami Herald a real estate panel in September that she and other lawmakers intended to approve penalties next year for condos that don’t meet the new requirements.
Other factors in delaying reserves
Still thinking about delaying reserve contributions until 2026? Sheir said there’s other factors to consider.
Lenders and insurance companies review condo associations’ financial documents when making a loan or when issuing or renewing policies. Should an association choose to delay reserve contributions to 2026, loan requests or insurance policies may be rejected or come at a premium with higher interest rates and costs because companies may want to protect themselves against taking on more risk.
“Having reserves is becoming very important for the financial welfare of associations,” Sheir said, “and being looked at closely by insurance companies and lenders.”
But it all comes down to this: Condo owners will have to pay more to remain living in the same building. Reserves will kick in, whether associations choose to start in 2025 or 2026.
It’s a financial burden many fear, with wages falling short of the cost of living and others, including retirees, struggling with tight budgets.
This story was originally published November 13, 2024 at 5:00 AM.
