MUSINGS OF A COMMUNITY ASSOCIATION LAWYER: CONDOMINIUM COLLAPSE DISASTER, QUESTIONS AND MORE QUESTIONS

On June 24, 2021, at 1:25 a.m. EDT, a portion of the Champlain Towers South Condominium collapsed in Surfside, Florida.?The collapse was a human tragedy, and the investigation into the cause of the collapse is still on-going.?

For me, the collapse highlighted a number of questions and issues related to condominium ownership, operations, maintenance and statutory requirements for all condominiums, new and aging.?The issues are not new.?In my thirty-six years of practice, the questions and challenges regarding costly maintenance projects have regularly been part of conversations with clients during all that time.

?Putting aside the history and causes of this particular disaster, let’s look at the areas of concern for all condominiums and multi-story attached dwellings.

?1.????????In Florida, the life expectancy of a condominium building is definitely affected by its location.?If it is on the coast, it is affected by salt air, sun, sand etc.?If it is interior and more northern, it is affected by cold, and so on.?And, buyers who come from areas where homes are more than 100 years old may not understand that a fifty-year old building in Florida could have reached the end of its useful life.

?2.????????One of the biggest problems Boards of Directors face is the number of owners who don’t know what they bought.?They haven’t read the Governing Documents (and may not have received them at closing); they may not understand them if they do read them; and they have no idea there is a body of law, and that they have responsibilities as owners.?The Boards are made up of volunteers who may not have expertise or experience regarding maintenance, repairs or general business operations.

?3.????????Miami-Date and Broward Counties in Southeast Florida have a mandatory 40-year structural inspection report required.?So, the Board gets the report.?What then?

That requirement is only for those two counties.?Should it be state wide??Who performs the inspection??Does the inspection cover the structure of the building and the windows; the plumbing, the electrical systems, the elevator, the pool??Let’s assume a licensed professional engineer is providing the report and that it is comprehensive and includes prioritization of the work to be done ranked in order of immediate need.

What happens to the report once it is received? Should it be shared with the membership??If there is a maintenance or repair issue that could become a hazard, shouldn’t they be informed.?If a seller has a copy of the report, would they be required to disclose it to a potential buyer?

?What is the Board of Directors’ responsibility to act on the report once it is received??Does the Board have to do everything in the report??

? In Florida, Directors have the affirmative obligation under the Law and the applicable governing documents to maintain, repair and replace the common elements of the condominium.?The determination of when and what to repair is left to Board discretion. These are lay people expected to determine if and when to get the infrastructure and improvements inspected, and when to defer maintenance projects.??

That being said, the Florida Business Judgment Rule provides that Directors who get and act upon advice from experts, and act in good faith with the best interests of the property and the owners first in their minds, will be protected from personal liability if something goes wrong.?But, once the Directors are on notice of a potentially dangerous condition or urgency of repair, if they don’t take action, they may have personal liability.?Still there is no statutory or documentary obligation to conduct periodic inspections, or to hire an outside expert to provide a professional evaluation of remaining useful life and recommend the appropriate timetable or course of action.?Too many Boards may rely on the “Looks good to me” approach.?But, it appears that 50-70 years may be the useful life of a high rise on the beach, and that is assuming regular maintenance and repair over the years. Condominiums in Florida go back to the 1970’s.

?4.????????Then we have the financial questions.?Repair and replacement projects can be very expensive, especially when they have been deferred over a long period of time. However, the Boards face political ramifications to the decisions about money.??????????????????????????????????????

Reserves – Condominium Law provides that funding of reserves can be reduced or waived by membership vote on an annual basis. Over the years, boards have managed assessment increases by not funding reserves, and figuring they would rather have a special assessment when the repair can’t be avoided any longer. In light of recent events is it still good business judgment to skip the reserves every year?

? Large special assessments - Older condominiums may have owners who are on fixed incomes and cannot handle a large special assessment.?Boards then have to deal with delinquent payments and inability to fund the projects. Do your documents have owner approval requirements for special assessments??If the owners don’t agree, the Board may find itself in breach of its fiduciary duty to maintain, repair and replace.?

Lenders will feel the impacts of the owner assessment defaults. If there are no reserve funds for projects, will lenders fund mortgages in older buildings??????????????????????????????

???????????Insurance coverage – Collapse claims could lead to increase in premiums for us all.?And, will there be adequate coverage available for older buildings?

?4.????????Board of Directors – If board members face recalls and confrontational pushback from the owners because the directors levy assessments or otherwise approve expensive repair projects, how long will it be before none of the owners are willing to serve?????????

? Boards will have to balance Life Safety issues against prudent fiscal management and timing of deferred maintenance.

?At this point, there are a lot of questions, and many very smart people are involved in the discussion and the search for answers.?There may be new document provisions; or changes to state law.?There may be broader involvement of governmental agencies.?Whatever the end result, the collapse opened eyes and minds to the responsibilities of operating and living in a condominium.?And, I hope we can move ahead in a productive and responsible way to ensure quality condominium living for many years to come.