Surfside condo association deeply underfunded as repair bills piled up, report found
The report states that various components of the Surfside, Florida building had no years of “remaining useful life.” These included the driveway and the garage – where some experts believe cracking concrete may have contributed to last month’s deadly collapse.
The study, which has not been published before, highlights how wrangling over valuations and underfunded reserves has strained the repair situation at the South Champlain Towers.
The association is expected to have just over $ 706,000 in its reserves in January 2021, according to the report, while the association’s reserves have recommended it stockpile nearly $ 10.3 million to account for necessary repairs. .
Robert Nordlund, founder and CEO of Association Reserves, told CNN in an interview that about three in ten condo associations nationwide that his company’s valuations are high risk, with less than 30% of reserves. recommended. He said the report shows how important it is for condominium associations to store enough money to make regular repairs.
“I just wish they’d hired us five, 10 or 20 years ago,” he said of the Champlain Sud condominium board of directors.
The board had never before received a reserve budget study, according to a separate PowerPoint presentation to residents in November 2020. The presentation hinted at the controversial landlord debates over big-ticket items. “Complaining or yelling at each other doesn’t work!” said a slide of the presentation, underlining the statement.
The lack of reserves made it difficult for the condominium association to raise money for repairs. Another presentation to residents in December 2020 stated that “two big HOA [Homeowner Associations] the lenders refused us “for the loans.
The loans were turned down because the condominium association was in a “higher risk category” due to its relatively low monthly maintenance costs and lack of funds saved on reserves, according to the presentation.
“We should have a lot more money in the bank for lenders to be comfortable,” the presentation said. “We haven’t done any reserve studies or put enough reserve money aside to prepare for this day.”
The condominium association ultimately secured a $ 12 million loan from the Valley National Bank in March 2021 to pay for the repairs, according to financial documents obtained by CNN. The special assessment of $ 15 million was designed to repay that amount.
Nordlund said he thought his company’s report was “a wake-up call” to the condominium board, spurring the valuation.
A spokesperson for the Champlain Towers South condo association did not comment on the budget report. Association attorney Donna DiMaggio Berger told CNN’s Chris Cuomo last month that under Florida law, association boards create operating budgets with reservations, but a majority members of the association can vote to waive the reservations.
“In far too many communities we have members who vote to give up reservations every year,” she said.
Peter S. Sachs, a Florida lawyer specializing in condominium law, said the report showed the board tried to “do the right thing” by getting a thorough analysis of its reservations. But he said it also reveals how “previous councils may have been asleep at the wheel or unable to overcome political resistance from unit owners” to raise money for maintenance.
The collapse is expected to inspire new regulations forcing condominium associations to save reserve money and avoid postponing necessary maintenance, said Eric Glazer, a South Florida-based attorney who is part of a committee that will advise the task force examining Florida condominium law following the collapse.
“Florida needs to step up its efforts and force people to put money aside for rainy days,” Glazer said.
Florida law already requires condominium associations to hold reserves for repairs that cost more than $ 10,000, but a majority of homeowners can vote to waive the requirement, state legal experts have said.
Nordlund agreed that the building collapse could lead to changes in the practice of condominium finance. After the disaster, he said, “we went through this file, looking, did we miss anything? ”
“We are in the area of the budget, not in the area of security,” he said. But if the board had conducted a budget study earlier and acted faster to raise funds and make repairs, he said, it could have meant “averting a tragedy.”