FLORIDA LEGISLATURE GOES OUT WITH ONE BIG BILL FOR CONDOS

The Florida Legislature ended in a real blockbuster way in regards to new condo legislation.  In the end The Florida House and The Florida Senate agreed on ONE BIG BILL that is 191 pages long.  It passed the Senate unanimously and in the House there were only 2 opposed.  Obviously, we can’t talk about the entire contents of the bill in one blog.  It will take several, but today let’s discuss the big RESERVE FUND CHANGES.

As we know………….In 2021, The Champlain Towers collapsed in Surfside, killing 98 innocent men, women and children.  After that collapse The Florida Legislature did the right thing and for the first time, mandated that Florida condominium owners contribute toward funding a reserve account each year.  The vote was 110-0. 

Well…..that vote didn’t hold up to some extent.  Now, you can pay reserve funds by taking out loans, and in some circumstances you don’t have to pay reserves at all.  Let’s explain.

RESERVES BEING PAID BY LINES OF CREDIT

The Bill will allow funding reserves by using lines of credit. 

So year one you take out a line of credit to fund reserves.  You have to start paying it back with interest immediately, over a few years.

Year two you take out another line of credit to fund reserves……NOW YOU HAVE 2 LOANS WITH INTEREST

Year three you take out another line of credit to fund reserves…….NOW YOU HAVE 3 LOANS WITH INTEREST.

And this would now be allowed to go on year after year after year. 

As I previously wrote,  THIS IS LIKE PAYING YOUR MONTHLY CONDOMINIUM ASSESSMENTS BY USING A CREDIT CARD. 

AND………………….The money in reserves will eventually be used to pay for repairs, but all of these lines of credit  still need to be repaid each month.  It will be a never-ending process.  A never ending loan that all of the owners will have to re-pay with interest.  Eventually, the monthly payments will far exceed what the payments would have been if everyone was simply required to pay what the reserves required in the first place.   This is playing with fire and condominium owners will forever be in debt.  Count on it.

INVESTMENT OF RESERVE FUNDS

The Florida Legislature did agree with a blog we posted two weeks ago and which would have allowed reserve funds to be invested anywhere.  But as we stated – that was a bad idea and would have required an investment committee as well.

So the new law states:

A board shall, in fulfilling its duty to manage operating and reserve funds of its association, use best efforts to make prudent investment decisions that carefully consider risk and return in an effort to maximize returns on invested  funds.

(b) an association, including a multicondominium association, may invest reserve funds in one or any combination of certificates of deposit or in depository accounts at a community bank, savings bank, commercial bank, savings and loan association, or credit union without a vote of the unit owners.

A good bill – but it does leave open the question…..Suppose you do get the vote of the owners……can the owners vote to put the reserves in the stock market?   I don’t know.

AND HERE IS THE OTHER MASSIVE SURPRISE WHEN IT COMES TO RESERVE FUNDS

The new bill states:

For a budget adopted on or before December 31, 2028, (so this includes the association’s 2029 budget) if the association has completed a milestone inspection within the previous 2 calendar years, the board, upon the approval of a majority of the total voting interests of the  association, may temporarily pause, for a period of no more than two consecutive annual budgets, reserve fund contributions or reduce the amount of reserve funding for the purpose of funding repairs recommended by the milestone inspection. An association that has paused reserve contributions under this subparagraph must have a structural integrity reserve study performed before the continuation of reserve contributions in order to determine the association's reserve funding needs and to recommend a reserve funding plan.

SO TO BE VERY CLEAR HERE……….THIS ONLY APPLIES TO ASSOCIATIONS THAT HAVE HAD THEIR MILESTONE INSPECTION, MEANING THEIR 25, 30, 35, 40, 45 OR 50 YEAR INSPECTION) WITHIN THE PREVIOUS 2 CALENDAR YEARS.  THIS DOES NOT MEAN THAT STARTING IMMEDIATELY, EVERY CONDO GETS TO PAUSE RESERVE FUND CONTRIBUTIONS FOR TWO YEARS.  THAT IS NOT WHAT THIS NEW LAW IS SAYING……. YOU ONLY GET TO PAUSE RESERVE FUND CONTRIBUTIONS FOR UP TO TWO YEARS, IF YOU HAD YOUR MILESTONE INSPECTION WITHIN THE LAST TWO YEARS.

AND THIS IS BEING ALLOWED IN ORDER THAT YOU HAVE THE FUNDS AVAILABLE TO MAKE THE REPAIRS REQUIRED BY THE MILESTONE INSPECTION.

In all honesty, this is not as bad as I originally thought it to be.  It gives owners the ability to make and pay for the necessary repairs while not simultaneously paying reserves ----- but only for a two year period.

BUT I’M GOING TO GET A MILLION CALLS AND E-MAILS ASKING ME IF IT’S TRUE THAT WE DON’T HAVE TO PAY RESERVES IN OUR CONDOMIINIUM FOR THE NEXT TWO YEARS…….AND MY ANSWER IS GOING TO BE………..

ONLY IF YOU HAD YOUR MILESTONE INSPECTION WITHIN THE LAST TWO YEARS.

Again, this bill is massive.  We only scratched the surface.  Over the next few weeks, we’ll let you know what else is in the bill and we’ll let you know if Governor DeSantis signs it into law.

Watch our latest episode of Condo Craze and HOAs for a lively discussion of the new laws