This year has come with many challenges. As we wrap up the budget season, we see that things will get more challenging for our associations over the next few years, especially for those associations that kept fees low and never put money away for a rainy day. So many factors will impact cost, inflation, tight labor market, the increase in the minimum wage (Amendment 2), and the potential changes that our legislatures will potentially approve for next year after the tragedy of Surfside. These changes will have a ripple effect on many associations' budgets for years to come.

As managers, we must ensure we communicate these challenges to our residents to understand the board's direction and why. The Task Force of the Florida Bar that was put together after the tragedy at Surfside has put together an initial report with their findings and recommendation. They put together a comprehensive report with their findings. While many great points did get hit, I don't necessarily agree with others, but we'll leave that for another blog. In today's blog, I wanted to highlight the area of Reserve Studies, Reserve Funding and, Reserve Waiving so you can get an idea of what is to come.

Task Force of the Florida Bar - Recommendations on Reserve Studies:

The Task Force recommends amendments to the Act to require periodic reserve studies for residential condominiums with 3 stories or greater. As stated elsewhere in these recommendations, the content of such reserve studies should be made through a uniform prescribed template by licensed architects or engineers as described in Article 3(d)(ii)(3) of this Report regarding association inspection reports, or licensed general contractors who serve as cost estimators with at least ten years of licensure and ten years of experience in vertical construction. The Task Force recommends that the Legislature consider combining the content of the reserve report recommended in this Article 5 and the inspection report recommended in Article 3 to avoid duplication of services and unnecessary costs to associations.

I love that they want associations to obtain reserve studies; however, I would like this to include all associations, and it should be updated every thirty (36) Months.

Task Force of the Florida Bar – Recommendations on Reserve Funding:

As to deferred maintenance and repair and replacement of the components listed in Section 718.301(4)(p) of the Act, the Task Force recommends that by December 31, 2026, an association be required to establish a fund for each component in an amount equal to not less than 50% of the replacement costs based on the estimated remaining useful life. For those building components that have a useful life of more than 30 years, such as structural, fire protection, elevators, plumbing, electrical and drainage systems and seawalls, the Task Force recommends an association establish a reserve fund for these components using a 40-year original useful life, with a remaining useful life based upon the most recent building inspection report. The Task Force recognizes that certain building components such as heating and cooling systems may have a useful life less than 30 years and such useful life determination should be pursuant to the most recent building inspection report. If an association does not achieve the required funding by December 31, 2026, it shall be obligated to secure an alternative funding mechanism(s), which must be disclosed to the unit owners, and to prospective purchasers in the FAQ and in the estoppel form. Non-mandatory reserves shall be funded at the levels recommend by the board of directors.

Task Force of the Florida Bar - Recommendations on Association Waiver of Reserves:

The Task Force recommends that the authority to annually waive or reduce mandatory reserves be amended to require the approval of no less than 75 percent of the voting interests present and voting at a meeting at which a quorum is present. The Task Force further recommends that no association may reduce mandatory reserves below 50 percent of the total statutorily required amounts. For any amounts waived, the association must establish an alternative funding mechanism(s). The waiver and alternative funding mechanism(s) must be disclosed in a conspicuous manner to unit owners, and to prospective purchasers in the FAQ and in the estoppel form.

I like the fact that associations will need a 75% vote to waive reserves. Increasing this from 50% to 75% will make it challenging to get it waved. I also like that they cannot waive more than 50% of the reserves even though I would have like to see 75%.

 
Florida is one of the few states where an association can waive reserves, and that needs to change. Board members and managers are put in challenging situations when associations don't have the appropriate funds to repair what is necessary to operate safely. I've included a link to the full report below; make sure to read it because it contains many more recommendations for our industry.

Florida Bar Task Force Report Link