Q: In a previous column, you mentioned the new statute that deals with building inspections and reserves. I understand the reason for these changes, but do not understand how they are enforced or how extensive they are. Can you comment further on that? (SS, via e-mail)
A: This may be the most impactful change to the condominium statute since it was first enacted in 1963. In sum, there are three main new requirements in the new law.
First, all buildings of three stories or more must have a “milestone inspection” performed, and a “milestone inspection report” and separate “summary” prepared. The due date depends on the age of the building and its proximity to the coastline, although all pre-1992 buildings of three stories or more must complete these requirements before the end of 2024. The milestone inspection and report must be performed and prepared by a licensed architect or engineer.
Secondly, there must also be a “structural integrity reserve study” for buildings covered by the statute. This reserve study requires visual inspection by a licensed architect or engineer and requires a number of previously unregulated structural components of buildings to be addressed.
Finally, “fully funded” reserves must be set aside for those items covered by the structural integrity reserve study. These reserves cannot be waived or reduced by either the board of directors or the unit owners.
As to potential liabilities, the statute states that a licensed manager or management company must “comply” with the new law “as directed by the board.”
The statute also imposes breach of fiduciary duty liability on directors and officers for a willful or knowing failure to comply. Since directors have a fiduciary duty to comply with the law in general, it is hard not to conclude that it was the intent of the Legislature to impose greater liability on officers and directors, although the law does not make it clear exactly what that means.
The primary defense to breach of fiduciary duty claims is known as the “Business Judgment Rule,” which is codified at Section 617.0830 of the Florida Not For Profit Corporation Act. That law states that a director may rely on information and opinions prepared by persons the director reasonably believes to be reliable and competent in the subject matter. Accountants and attorneys are specifically mentioned in the statute. As to engineering issues, licensed engineers would be persons upon whom a board could reasonably rely.
So, the best protection is to use the appropriate qualified professionals to guide the board through this new maze. That may mean investing a little more in engineering and legal fees than you would like or had planned to, but this is definitely one of those situations where investment in the proven ounce of prevention is not a luxury.
The law became effective on May 26, 2022. While there may or may not be “glitch legislation” or other legislative change efforts, associations cannot and should not count on the law being changed in any material fashion. There may or may not be some effort to ease up the reserve funding requirements due to market sensitivity and affordability issues, but that is far from certain.
The Division of Florida Condominiums, Time Shares and Mobile Homes is the state regulatory agency for condominiums in Florida. By December 31, 2022, every condominium association must log onto the Division’s website and fill out a form that provides information regarding the condominium. There are questions about the number and height of buildings. The Division is then required to summarize this information and post it on its website.
The Division has also been given enforcement authority regarding the new statute, and has always had enforcement authority over reserve issues, as to which it has historically shown a “strict interpretation” philosophy.
Local governments and County Commissions have also been granted the authority to enact ordinances to enforce the new laws.
Joe Adams is an attorney with Becker & Poliakoff, PA, Fort Myers. Send questions to Joe Adams by e-mail to [email protected]. Past editions may be viewed at floridacondohoalawblog.com
This article originally appeared on Fort Myers News-Press: Enforcement of new structural safety law examined
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