FORT LAUDERDALE — Condo owners around Florida face tens of thousands of dollars in unexpected bills to fix deteriorating buildings and avoid the type of catastrophe that struck Champlain Towers South in Surfside.
In many cases, the owners themselves — people with no engineering expertise — have decided not to stockpile the money they need to keep their buildings safe, and lenient state laws let them get away with it.
Many owners will wind up paying the price for earlier residents who passed the problem down the line.
“Whoever’s left standing when the music stops are the losers, and that’s not fair,” said attorney Andrew Blasi, of Shapiro Blasi of Boca Raton, whose practice includes commercial and residential real estate and finance.
Under Florida law, condo associations must maintain reserves for repairs or replacement costing more than $10,000, such as swimming pools, roofs and balconies. But the law gives the owners an out: Funding for the accounts can be waived by a majority vote of owners, the law says.
Additionally, no Florida county other than Broward or Miami-Dade even requires condo buildings to make 40-year inspections for older buildings, meaning potentially disastrous situations can worsen for decades.
Nearly a dozen states mandate reserves to guarantee buildings are kept up. In New York, corporation directors must set aside “reasonable sums for reserves,” state law says.
Illinois also requires associations to budget “for reasonable reserves,” but the requirement can be waived by a two-thirds vote of an association.
Many western states, with fewer condos than Florida, do not require reserves. Neither does Georgia.
Without reserves, the sudden cost to Florida’s condo owners can be astronomical.
The board at Champlain Towers South compiled a list of $15 million in needed repairs for the roof, support columns and other projects, according to various reports. The likely assessments to owners: $80,000 to $200,000.
“Anecdotally, there is a fair share of the older buildings that are waiving and unfortunately those are the ones that need[funding] the most,” Blasi said.
Diana Fairbanks has seen the situation as both a Realtor and a condo owner at Plaza South on Galt Ocean Mile in Fort Lauderdale.
A number of aging towers there have performed major repairs, Fairbanks said, but they’ve been expensive.
“They’ve all gone through recent major renovations,” Fairbanks said. “It seems to me the average assessment has been between $20,000 and $60,000. It hasn’t been cheap by any means. A lot of big condos have taken loans out, but it’s still a big chunk of money.”
The reserve situation “is such a mess,” she said. “Just about every association out there can never get enough votes. They waive the requirements. It comes up for a vote every year, and every year they vote it down.”
When Fairbanks bought her condo, it faced a $32,000 assessment to help pay for repairs to a big pool deck over the parking garage. The deck contained grass, and when the space was watered, the garage below would get a shower.
During her contract negotiations, the seller ended up paying the assessment, she said.
“This is a challenge in every community,” said Tom Skiba, CEO of Condominium Associations Institute, based in Virginia, “Put that money away or you wait until there is a massive repair and you have to collect a lot of money.”
Nationwide, a “vast majority” of condo owners support reserves, Skiba said. In a poll for the institute, Zogby International found that 71% of those surveyed backed “annually investing” in funds for future repairs.
That does not appear to be the case at many Florida condos.
“I’ve seen situations in condominiums where there is massive division over whether or not the board should have allowed the installation of an additional barbeque grill,” said Blasi, the attorney in Boca Raton. “You can only imagine when you’re faced with this extraordinary, almost existential assessment.”
A bad mix
Gary Mars, a shareholding attorney at the law firm of Siegfried and Rivera in Coral Gables, says the overarching powers of condominium directors, and the fact that they often lack expertise in construction, makes for a bad mix.
“It’s a question about a condo association recognizing the state of the building and remedying it in an objective manner,” he said.
Sometimes boards will prioritize aesthetic repairs over structural ones, repairing lobbies instead of support columns. Condominium covenants also can restrict how much money a board can spend at once. Boards have the power to ignore the advice of expert engineers and architects.
“You have to mandate some of these things and make it less discretionary,” Mars said.
Attempts to strengthen Florida’s laws have been unsuccessful, however — with lawmakers sometimes fearing backlash from voters.
On mandatory reserves
Ron Silver, a state legislator for 24 years, represented a district with thousands of condo owners in Miami-Dade and Broward counties.
He said he once took heavy criticism for recommending fire sprinklers in condos — mainly because the associations and residents didn’t want to pay for them. At election time, condo political activists worked to steer votes to his opponent.
Now, he, too, agrees that reserves should be required.
“You have to say, ‘Hey, there has to be mandatory reserves,’” Silver said. “Nobody is looking at the financing situation — how do you finance this stuff?” he asked. “That may be something for the private sector to come up with.
“None of this stuff is deductible on your income tax. Maybe come up with something like your mortgage payment, which is deductible. Make the assessment deductible and that will soften the blow.”
Attorney Blasi said the legal exception that allows residents to waive reserves should be eliminated.
Lawmakers also need to revise a part of the law that calls for boards to make “good faith” estimates of the cost of repairs, he said. Blasi called the phrase “an amorphous standard that really gives an out to a lay person board and gives them an ability to ball- park in a non-professional way.”
Engineers or others with construction backgrounds should be the ones who are making those estimates, Biasi said.
Staff writer Mario Ariza contributed this report.