Aging condos fraught with challenges for owners, governing groups

In this aerial file photo from 2017, the Miami skyline is seen with cranes. Photo: The Associated Press

By Michael R. Malone

In this aerial file photo from 2017, the Miami skyline is seen with cranes. Photo: The Associated Press

Aging condos fraught with challenges for owners, governing groups

By Michael R. Malone
Business and law experts at the University of Miami gauge the impact of the Surfside tragedy on the owners of older condominium units and examine initiatives to revamp the policies and procedures that regulate the associations.

The collapse of the Champlain Towers South in Surfside—the third worst building collapse disaster in U.S. history—has riveted attention on the plight of owners of aging condo units and the associations charged with managing building upkeep, according to University of Miami business and law experts. 

“The tragedy has certainly made anyone who lives in a condo, and especially an older one, much more attuned to the importance of physical inspections,” said Andrea Heuson, a finance professor at the University of Miami Patti and Allan Herbert Business School, who specializes in real estate.

Heuson noted the three condo booms of the past decades: the early ’80s—the era in which Champlain Towers North and South were built, the mid-’90s, and then again in 2005-06. She emphasized, as has been well-documented, that in the aftermath of Hurricane Andrew in 1992, South Florida implemented among the strictest building codes and code enforcement in the nation.

“We’ve become much more serious about enforcing the code, but the condos we need to worry about are the ones built in the early and mid-’80s,” she said. 

Ownership of an aging condominium unit and the associations set up to manage them are fraught with problems, she explained. 

“You have to live in the building to be on the board and, as an owner, you have to provide financially enough to pay for the operating expenses of the building,” she said, noting that a condo owner owns only a three-dimensional section of air. The physical structure—the building itself—is owned by the association which manages all aspects of operations overseeing insurance, repair, and maintenance. 

There are nearly 50,000 condo associations in Florida and maintaining qualified candidates and fully staffed condo boards can be a challenge, according to Heuson. In addition to her professional expertise, she and her husband own a condo and from firsthand experience are familiar with the challenges. 

“The problem is that the unit owners, in order to make repairs, have to vote to tax themselves—and that’s the huge problem,” Heuson pointed out. “Everyone has the incentive to postpone these major projects for as long as possible.” 

In the wake of the Surfside tragedy, the Florida Bar has set up task forces to explore how to promote more responsible condo management and safety, especially for the 920,000 condo units 30 years or older registered in Florida and the 2 million people who live in them. 

Bill Sklar, a long-standing adjunct professor at the School of Law who has taught condo law for several decades, was named chair of the Condominium Law and Policy Life Safety Task Force of the Bar’s Real Property, Probate, and Trust Law Section. 

“Our mission is to review all aspects of Florida Condominium Law to determine if any changes are necessary that could prevent this terrible tragedy from recurring,” he explained. “We’re not seeking to create new laws, though there may be some that are necessary, but instead are looking at what’s on the books and to see where something has lapsed.” 

The task force met July 9 for the first of what is likely to be 12 to 15 meetings. Sklar said the group is committed to producing a comprehensive result and finishing in advance of the legislative committee meetings in the fall. 

“We feel it’s necessary that our findings and recommendations be presented by early October at the latest, so that they can at least be advanced and seriously considered by the committees,” he said. 

Among the many issues to examine, Sklar noted, the task force will explore whether there should be a statewide inspection and certification requirement and what that inspection will entail. Currently, the 40-year inspection is on the books only for Miami-Dade and Broward counties. 

“But why is it 40 years and not 30 or 20? And why only for these counties?” he asked, adding that the current inspection includes little specificity in regard to what “structure” even encompasses. 

He agrees with Heuson regarding the challenges that condo associations face when they must decide to self-tax by levying special assessments—from owners who sometimes live elsewhere and rent out their units—or who are simply reluctant or unable to pay for needed repairs. 

“Overwhelmingly, people who volunteer to serve on these boards are serving for the right reasons—they care about their neighbors and their communities, and they want well-maintained buildings,” Sklar said. “But they also don’t want to unnecessarily incur substantial assessments which affect them financially. There’s an inherent conflict.”

He outlined the scenario of a board, having received a report produced by a qualified third-party consultant, a licensed structural engineer or other appropriate professional, that calls for substantial repairs and having then to go to its membership to say that they must spend X millions or tens of millions of dollars to bring the building back up to the condition that is recommended by the professional.

“That board is not going to be very popular with the membership,” he said, emphasizing, “I am not suggesting that is a reason not to do what must be done for the life safety of all residents.” 

Generating these reserves to pay for large repairs are at the heart of the dilemma. In the case of Champlain Towers South, for example, the association had $777,000 in reserves—and faced repairs estimated at $16.2 million, according to media reports. 

“One thing that we should talk about is whether these types of reserves, which finance repair or reinforcement of concrete or rebar, are essentially for infrastructure and so should be eligible for federal or state subsidies,”  Sklar said. “Or, that say, Ms. Jones, who’s 80 and doesn’t have $50,000-$100,000 to pay the assessment, may be eligible for a 30-year note that lends her the money at a lower or no-interest rate.” 

He referred to the debate in Washington regarding the infrastructure plan before Congress. 

“When one lives in a building, albeit a private building, and the concrete and rebar that supports that high-rise is compromised—is that not a form of deteriorating infrastructure?” Sklar asked. “I don’t have the answer, but I pose the question regarding the possibility of government-subsidized or government-guaranteed assured financing to assure that we’ve achieved a base level standard of infrastructure in the form of buildings that do not collapse.” 

Sklar said that he believes that the vast majority of condo buildings are well-maintained, do not have water intrusion, and are well run by their boards and associations. 

“But to the extent that we don’t know, to the extent that there is not a uniform method of inspection and disclosure, we need to know—because there are gaps,” noted Sklar, who is also the director of the law school’s Ralph E. Boyer Institute on Condominium and Cluster Development, a two-day workshop that takes place in West Palm Beach in early October.

Sklar recognized that the task force has a colossal charge in terms of assessing the existing law and policy. 

“The task force is not investigating what occurred at Surfside, but we’re seeing what the contributing factors may have been,” he added. “We’re looking at those under a microscope given the current laws of Florida and seeing where we can fill in to prevent this horrific tragedy from occurring again.”