Florida’s condo associations need fiscal reform

It’s silly to try to fill a bathtub without a plug, but that’s exactly what is going on with reserve funds among Florida condominiums. Associations in Florida with weak reserve funds are about 50% higher than in any other state because state law gives condo owners the power to waive reserve funding. Reforming starts with taking this line item veto power out of the hands of the owners.

In my July 8 CNN interview, I discussed the reserve study we prepared in 2020 for the ill-fated Champlain Towers South, (this was unfortunately the association’s first reserve study). We don’t know if this building was doomed from day one, but we do know with certainty that deterioration is the enemy of every building, and can’t be ignored for 40 years. On June 24, our understanding of the consequences of deferred maintenance grew to include multiple lives lost.

The cost of ongoing deterioration is what a board learns in a reserve study prepared by a budget and cash flow expert, and updating it at least every third year. The cost of such a report, typically only one half of 1 percent of an association’s annual budget, is trivial.

Fannie Mae, Freddie Mac, and FHA minimum reserve funding requirements are 10% of total budget. Guided by a reserve study, the board learns if its reserve funding needs are higher. Owners pay for deterioration through periodic special assessments. Ongoing contributions are just a smoother way to pay exactly the same costs.

As an industry expert, I call on legislators and citizens to change the key Florida laws that contributed to the Surfside tragedy. Setting aside adequate reserves in the monthly budget, sufficient to maintain the building, is affordable. Loss of life is not.