Reformed Reserve Funding Laws in Florida: Be Prepared

In May 2022, the Florida Legislature passed and signed into law new legislation enacting new requirements to address concerns on the structural integrity of older condominium-type buildingsas a result of the Surfside Chaplain Towers condominium collapse in June 2021.

The legislation, through Senate Bill 4-D and companion House Bill 5-D, was presented and voted into law very quickly and made significant changes to several sections in Florida Statute 718 related to buildings and reserves.There are many provisions that must be implemented by Florida condominium-type timeshare associations, and those with the most significant impact are discussed below.

Under the provisions of the law, milestone inspections will be required for applicable buildings that are 3 stories or higher and more than 30 years old. That age requirement is lessened to 25 years for properties within 3 miles of a coastline.A milestone inspection under the new provisions of Florida Statues 553.899 is defined as “a structural inspection of a building, including an inspection of load-bearing walls and the primary structural members and primary structural systems…for the purposes of attesting to the life safety and adequacy of the structural components of the building and, to the extent reasonably possible, determining the general structural condition of the building as it affects the safety of such building, including a determination of any necessary maintenance, repair, or replacement of any structural component of the building. The purpose of such inspection is not to determine if the condition of an existing building is in compliance with the Florida Building Code or the fire safety code.”

These inspections have the following requirements:

The legislation defines the Structural Integrity Reserve Study (SIRS) as a “study of the reserves required for future repairs and replacement of common areas based on a visual inspection of the common areas.”

The SIRS has the following requirements:

One of the most important provisions of the legislation is that the recommended funding requirement in the SIRS must be included in the association’s annual budget and the recommended funding requirements cannot be waived effective December 31, 2024.This would presume that for a calendar year association, the 2025 budget would need to include the funding from the SIRS and that funding cannot be waived. The legislation does not address the issue of pooled reserves vs. component reserves, so unless further clarification is provided, it is presumed at this time that pooled funding is still an available method.

For those condominium-type associations to which these new laws apply, Florida Statute 718.111(2)(g)1(A-J) sets forth the following required components:

There are many provisions included in the new legislation and although some are enumerated here, association boards and managers of condominium-type timeshare associations should read the new law to ensure they understand all the provisions that apply to them to ensure compliance.As of the writing of this article, but subject to change, it is generally thought that these legislative changes do not apply to timeshare associations that are not organized as condominiums (UDIs, etc.).

Boards and management should start planning for the implementation of these provisions sooner rather than later.The sentiment of the legislation implied that association board members (and management) will be accountable to the members for the structural integrity of the buildings going forward.Many associations waive reserve funding annually and have been doing so for years.When that is no longer an option, the financial impact could be extreme. It is imperative to maintain a watchful eye on the requirements as this new law is digested and possibly amended as well as to begin assessing what the financial impact will be on the association.

Republished with permission from Resort Trades, copyright December 2022.