Real Estate Counselor: All eyes on Florida Legislature for high-rise condo safety reforms | Opinion
For this inaugural edition of the Miami Herald’s “Real Estate Counselor” column that will appear regularly in Neighbors, we are going to focus on one of the questions that is foremost on the minds of the board members and unit owners of aging South Florida condominium towers: What condo-safety reforms can we expect after the horrific tragedy of the Champlain Towers South collapse?
So far, the most significant changes have come at the federal level from Fannie Mae and Freddie Mac, two government-sponsored companies that acquire residential loans to offer mortgage-backed securities for investors in the secondary market. They both have a massive influence over the terms for mortgages offered by lenders, and they recently released new requirements for loans for residences in high-rise buildings with five or more attached units to meet their standards for acquisition.
The changes, which are now being adopted and implemented by major residential lenders, place a heavy focus on structural and financial stability, and they reinforce the importance of meticulous documentation of all appraisals, meeting minutes, financial statements, engineering reports, inspection reports and reserve studies.
Fannie’s new requirements are already in effect, while Freddie’s will take effect for all mortgages with settlement dates on or after Feb. 28. Its new standards will exclude from eligibility any condo loans for units in communities with what it considers to be critical repair needs, which are defined as those that significantly impact a community’s safety, soundness, structural integrity or habitability, and/or that impact unit values, financial viability or marketability. These include all life-safety hazards, violations of any laws or ordinances, building code violations, fire-safety deficiencies and others.
Subsequently, properties that have already identified elements requiring attention and begun their remediation efforts may become ineligible until such work is completed.
Recommended reforms
A number of organizations have also developed task forces and issued reports and recommendations for new reforms. The Community Associations Institute, the largest national organization representing associations, has issued a report with a number of public-policy recommendations. Additionally, seven of Florida’s top architecture and engineering trade groups banded together and recommended re-inspections after 30 years with follow-ups every 10 years, and The Florida Bar has also completed a report and recommendations from its condominium life safety task force.
The recommended reforms from all these sources focus primarily on reserve studies and funding, building maintenance and inspections, structural integrity, and records transparency.
So far, only the city of Boca Raton has joined Miami-Dade and Broward counties by deploying its own safety inspection program. It now requires structural and electrical inspections for buildings that are at least 30 years old, while Miami-Dade and Broward’s inspections are at 40 years and every 10 years thereafter.
Most counties and municipalities appear to be taking a wait-and-see approach in anticipation of proposals from the state’s lawmakers during the current legislative session. Several bills focusing on reserves, engineering inspections and access to association records have been introduced and are now under consideration at the committee level.
Condo associations should act now
In advance of any legislative changes, the boards of directors for condominium associations in South Florida’s coastal areas should act now based solely on the new loan requirements from Fannie and Freddie to help ensure buyers will continue to have access to competitive mortgages for units in their communities. They should start by carefully reviewing their current and future reserve funding as well as the status of any structural and life-safety elements that may require attention.
The stricter lending standards are likely to be only the beginning of the reforms to come at the state and/or local levels, not to mention the expected new coverage requirements that property insurers will be implementing in accordance with the applicable regulations. The best approach is to get ahead of these changes by working with highly qualified engineering, construction, insurance and legal professionals to help avoid failed building inspections as well as forced evacuations and emergency repairs.
Gary M. Mars is a shareholder with the Coral Gables-based law firm of Siegfried Rivera who is board certified as an expert in community association law by The Florida Bar. He is a regular contributor to the firm’s association law blog at www.FloridaHOALawyerBlog.com. The firm also maintains offices in Broward and Palm Beach counties, and its attorneys focus on real estate, community association, construction and insurance law. www.SiegfriedRivera.com, 305-442-3334.
