Becoming familiar with two structural inspection reports that condo associations are required to submit this year can save buyers money or help them avoid making an expensive mistake.

Sellers will need to know what’s in their associations’ Milestone Inspection report and Structural Integrity Reserve Study before closing on a used condo unit as well, and owners who plan to stay in their units can learn what, if any, cost increases they will face for upcoming structural repairs.

Many, if not most, condo associations in Florida are required to have the reports completed by Dec. 31. Both must be delivered to each unit owner by personal delivery or mail within 45 days after receiving it. Associations must also post the reports on their websites, if required to have one.

Making the reports available to buyers and sellers will correct a lack of transparency that has endured for decades, said Orest Tomaselli, president and CEO of New York-based Strategic Inspections, provider of reserve studies for condo associations across the country.

“Accurate financial information and structural and mechanical condition information has not only been difficult to obtain but what little was provided was incredibly difficult to decipher,” Tomaselli told the South Florida Sun Sentinel. “Moreover, buyers weren’t the only ones unable to obtain accurate and readily available information. Unit owners in condo buildings have had the same difficulty.”

For buyers, the documents will help to inform you of the actual costs of ownership over the coming decade. For sellers, the new law that requires those studies also requires you to make copies available to your buyer before you can close on your sale.

If the structural reserve study finds that each owner will be assessed hundreds of thousands of dollars to maintain structural soundness of a building, they can use that information to negotiate lower prices. Sellers can use the information to help determine whether their buyer will even be able to find a lender willing to issue a loan for the seller’s asking price.

The two studies are required because of heightened safety measures enacted by the state Legislature and governor after the Champlain Towers South collapsed in Surfside, Florida, in June 2021 and killed 98 people. Authorities discovered that many associations that controlled older condo buildings routinely waived structural repairs and weren’t collecting enough reserves to pay for them.

Structural Integrity Reserve Studies are required by Dec. 31 and every 10 years afterward for all condominium buildings that are at least three stories high and at least 10 years old.

Reports of the studies will spell out the expected lifespan of the building’s major components, including:

—The roof

—The structure and its load-bearing walls and other primary structural elements

—Fireproofing and fire-suppression systems

—Plumbing and electrical systems

—Waterproofing and exterior painting

—Windows and exterior doors

—Other items with replacement costs of more than $10,000

The reserve study will identify what elements the association must pay to maintain or replace over the coming 10 years, and include how much money the association must collect each year to ensure those obligations are met. In 2022, the Legislature barred associations from waiving any reserves required for major structural components.

“Owners will know what condition their properties are in, how much it will cost to fix existing structural and mechanical components and the financial plan an association is enacting to handle the costs associated with repairs, future replacements and future reserve contributions,” Tomaselli said. “Buyers will know which condo properties will have sharp increases to maintenance and reserve costs and will be in a position to ‘right size’ the offer they make on those properties.”

Some real estate experts say that Gov. Ron DeSantis might support extending the Dec. 31 deadline. Earlier in September, DeSantis called on lawmakers to come up with suggestions for ways to ease the financial burden on fixed-income seniors who are facing large increases in monthly assessments because of the new requirements.

But Sen. Kathleen Passidomo, the outgoing Senate president, said in August that she opposes a special extension to tweak the requirements. She pointed out that the law does not require associations to begin amassing reserves required by their studies until 2026.

The Milestone Inspection, required separately from the structural reserve study, starts with a visual inspection by a qualified engineer of the structural elements of buildings that were at least 30 years old by July 1, 2022, and three stories or higher. It is designed to catch elements that are in imminent danger of failing and proceeds to a deeper “phase two” analysis only if the visual inspection identifies issues.

While the law provides a Dec. 31 deadline to have Milestone Inspections completed, associations are exempted as long as they have a contract in place to complete the inspection.

State law requires buyers to be given a summary of Milestone Inspection findings, not the entire report.

Numerous condo documents required before closing sale

The studies were added to a list of documents that sellers are required to furnish after a buyer signs an agreement to purchase a unit. The other documents include the condominium declaration, articles of incorporation, bylaws and rules, annual financial statements and budgets and a document called Frequently Asked Questions and Answers that lenders often use to determine whether they are willing to offer a mortgage loan in the property.

In the past, buyers have only cared whether they can get a mortgage loan and paid little attention to what was in the documents the law requires them to have, said Suzanne Hollander, an attorney and professor who teaches real estate law at Florida International University in Miami.

“They look like a big stack of documents, right? They look like a lot to read,” Hollander said. “I think, unfortunately, most people don’t even read their purchase and sales contract.”

Hollander urged unit owners to read the inspection studies after they are made available by their associations. “I think people need to read the disclosures about the structural inspections that have been done,” she said, adding that they also need to “read about the budget and they need to read the rules and regulations.”

The good news for the buyer is their real estate agent or mortgage broker is typically responsible for collecting the documents for the buyer.

Once the buyer receives the documents, they have 15 days if the seller is the developer and three days if the seller is not the developer to say they don’t like what’s in them — for any reason — and can terminate the contract and get their deposit back, she said.

While building departments of local cities and counties are keeping copies of the Milestone Inspections, and have authority to impose building code violations on associations that don’t get them completed on time, there’s no punishment for associations that fail to complete the Structural Integrity Reserve Study, said Travis Moore, a lobbyist for the Community Associations Institute, a trade group that represents homeowner associations, property managers and connected industries.

Even though those reports are filed with the Department of Business and Professional Regulation, “the law doesn’t say that (associations must pay) $1,000 a day if you’re late, and DBPR isn’t going to come knocking on people’s doors saying, ‘You haven’t done it,'” he said.

“Enforcement is going to be done when a buyer goes to buy and the lender requests (the study) and doesn’t get it, or an insurance carrier says, ‘In order to insure your building, we want to see this, and they don’t have it,” Moore said.

Then if the absence of a report or a lack of condo insurance resulting from the absence of a report prevents a buyer from getting a mortgage loan, the seller could then sue the condo board for violating their fiduciary duty to their condo association members, Moore said.

Ryan Paton, president of Coconut Creek-based Capitol Lending Group, a mortgage brokerage that finds lenders for condo buyers, says lenders take the amount of structural damage into account when deciding whether to approve a mortgage loan on a condo unit.

Some won’t lend if the reserve study identifies an assessment that would be difficult for the buyer to handle, along with the mortgage payment and monthly condo dues, he said.

Frequently asked questions raise red flags

Other reasons a loan application might be denied can be spelled out in another document that sellers are required to provide buyers, he said.

It’s called “Frequently Asked Questions and Answers” and the state required its disclosure to buyers in 2009 in response to the real estate crash that led to the Great Recession, Paton said.

“Kind of the same way that the Surfside collapse led to the structural inspection requirement,” he said.

The sheets must be updated annually and alerts buyers and lenders of potential trouble to come. On them, associations reveal the number of units owned by a single entity, the number of short-term rentals in a building, whether the association is being sued, how many owners are currently more than 60 days past due on their monthly fees, when the last structural and mechanical inspections were completed, when the last reserve study was done, whether special assessments are in place or planned, and if so, how much are they, among other questions.

Individual lenders might refrain from issuing loans based on answers they don’t like to any of the questions, Paton says. Many lenders have used the questions and answers to pre-approve condo associations where they are willing to lend, he says, and buyers would do themselves a favor by asking their real estate agent to show them only condos on lenders’ approved lists.

Why wait until contract is signed, one expert asks

Disclosure of the inspection reports will reduce the selling price of condo properties that are in poor condition and require substantial repair and boost values of properties in good condition with managers and governing board members who have “been pragmatic” in reserving for future repairs, Tomaselli said.

While state law requires sellers to provide buyers with copies of the inspection reports and all of the other required documents only after an initial purchase contract is signed, Deerfield Beach-based real estate consultant Jack McCabe, CEO of McCabe Research & Consulting, says potential buyers should be able to see documents before signing a contract on a condo unit.

Only a few condo documents are subject to public record laws. Of the required structural studies, only the Milestone Study is sent to the association’s local building department, where it can be examined by anyone who requests it.

While associations are required to send a copy of their Structural Integrity Reserve Study to the Department of Business and Professional Regulation, only associations and their authorized representatives will be allowed to access them.

McCabe said he would like to see condo associations be required to furnish their documents before a contract is signed because potential buyers “need to know what kind of debt they might be responsible for if they buy these properties.”

That would factor into what they’re willing to pay for the unit, he said. “If they’re buying a $400,000 condo and it’s subject to a $100,000 or $150,000 special assessment, and potentially much higher HOA dues as well, they need to know that before they sign the contract and to figure that into what the overall value of that property is.”

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