**Update** On May 26th, 2022 broad changes were made to funding reserves and inspections. Click to read about the major changes to reserve funding in Florida.
Florida Reserve funding laws for condominiums and coopeartives will stay the same for at least another year (no changes were proposed for home owner associations). This comes after several bills were introduced in the 2022 legislative session that just concluded. House bill 7069 passed the House of Representatives. That same bill was taken up in the Senate and passed with many amendments. The bill was sent back to the House as amended for approval, but ultimately the House and Senate could not reconcile the differences before the end of the session on March 11 and send it on its way to the governor’s desk for approval.
House Bill 7069
The House bill 7069 required a “structural integrity reserve study” every 10 years that had to be performed by a licensed engineer or architect for buildings three stories or more in height. It would have made the following items mandatory as part of the study:
- Load-bearing walls or other primary structural members
- Fireproofing and fire protection systems
- Electrical systems
- Waterproofing and exterior painting
- Any other item that has a deferred maintenance expense over $10,000
The structural integrity reserve studies would have to be included in the association’s official records and maintained for at least 15 years.
Also included in the House bill was a provision that buildings three or more stories in height that are 30 years or older (25 years for buildings within 3 miles of the coast) undergo a “recertification” inspection that focuses on structural and electrical analysis. This inspection would have to be done every 10 years after the first one. Buildings that fail the initial inspection would be subject to a “Phase 2” inspection that would likely involve destructive testing and more in-depth study.
Of primary note, this bill ended the process of allowing condominiums to waive their reserve funding for structural components, but did still allow them to waive reserves for other items.
Analysis and Opinion: This bill appeared to conflate a reserve study with an engineering report. A reserve study is for budgetary purposes, while an engineering report is for safety and structural conditions. Both items are important, but they serve different purposes. Performing a reserve study every 10 years is not frequently enough; 3-5 years is the right interval. A reserve study will often catch major issues and alert the association for further analysis from a specialist specific to that problem. Also, making all of the reserve studies be structural inspections and limiting them to only engineers and architects and not reserve specialists, would be problematic. I suspect associations would have had a difficult time finding someone with the exact set of skills to do a structural integrity reserve study. However, making condominiums fund at least some of their reserves is a good thing and this provision would have accomplished that.
Senate-Amended House Bill 7069
The Senate-amended House bill 7069 called for “milestone” engineering inspections periodically to be conducted by a licensed engineer or architect, similar to the version in the approved House bill. This amended bill also called for required reserve studies. The reserve study would be performed every 5 years, and the visual site inspection would be done at least every 10 years. The reserve could be conducted by an architect, engineer, or someone with a background of preparing reserve studies. However, the amended bill still allowed associations to waive reserves.
Analysis and Opinion: The amended bill had a more reasonable approach to the timeline for reserve studies and who could conduct them. However, allowing associations to waive reserves completely doesn’t help protect associations from costly repairs.
Takeaways: One consistency through all of the bills is that there appears to be a broad support for more inspections, but there are differences on funding mandates for the repairs and replacements that the inspections may find. While no new laws passed in this session, it is likely that banks, financial institutions, and insurance companies are going to have tighter in-house requirements for mortgages or insurance going forward. The sponsors of the bills in the House and Senate have indicated that they both would like to try again next year, so this is not likely the end of this issue.