Why Waiting to Implement the New Condo Repair/Reserves Legislation is a Mistake

It has become apparent that certain condo boards in Florida are taking a "wait and see" attitude towards implementing the requirements of the new Condo Repair/Reserves legislation. The reasons cited have been:

  1. The legislation was thrown together at the last minute, and until The Legislature clarifies ambiguous portions of the legislation, it would be hasty to act;
  2. The engineering/reserve studies that we currently have are good enough, and our reserves are enough; and
  3. The engineers are too busy or are outright refusing to conduct the required studies.

Waiting to implement the statutory requirements for all or any of these reasons is a mistake. Here's why:

THE LEGISLATURE IS UNPREDICTABLE

The Florida House of Representatives spent the 2022 regular session ignoring both the consequences of Champlain Towers and the property insurance crisis. It was only public outcry after the session, which caused both issues to be addressed in a special session. Will The Legislature pass a glitch bill in 2023 to clear up some of the ambiguities of the legislation recently passed? It may. If it doesn't, will a glitch bill be passed in 2024? Again, it's possible. If a glitch bill is passed, what issues will it cover? Again, who knows?

DIRECTORS RISK INDIVIDUAL LIABILITY

The common law in Florida before the passage of the new legislation basically immunized condo board members from individual liability except where they stole money from the Association, made financial decisions benefitting themselves, friends or relatives, or they used their position for discriminatory or vindictive purposes. Failure to maintain, failure to repair, failure to budget? These acts or failures to act may have subjected the condo association to corporate liability but were not a basis for individual director liability.

This has all changed with the new legislation. Pursuant to Florida Statute 468.4334(1)(a), the officers or directors of a condominium association required to have a milestone inspection, who willfully and knowingly fail to have the inspection performed, are in breach of their fiduciary duty and are personally liable.

The bottom line? Not taking action to at least attempt to secure the milestone inspection comes at great personal risk to board members. Would this be covered by directors' and officers' liability coverage? Perhaps. Or it could be subject to a policy exclusion.

THE NEW LEGISLATION IS VERY SPECIFIC ON WHAT IS NOW REQUIRED AND GUARANTEED IT IS DIFFERENT FROM WHAT YOU ALREADY HAVE

Nobody could have predicted the line items which The Legislature included in the new legislation, the terminology used, nor the procedures mandated. It is thus guaranteed that anything a Board had prepared before the legislation complies with what the legislation requires. With the personal exposure, relying on what you have is a risky move.

TRYING TO COMPLY MAY BE FRUITLESS

It is apparent that The Legislature passed the new legislation without inquiring of the stakeholders whether its implementation according to the strict schedule set forth by The Legislature was possible. The structural engineers of Florida certainly weren't consulted. In the wake of Champlain Towers and the Florida building boom in general, they were already overloaded. Board will have a very hard time finding engineers who are willing to undertake the studies and if so, are able to meet the strict deadlines in the legislation. So, the sheer nature of the task statewide in condo land relative to the manpower available to carry it out guarantees that for many condos, strict compliance will be possible.

TRY ANYWAY

There is a contract law concept known as "Impossibility of Performance" which under certain circumstances can excuse a party's performance under a contract. The Legislature has mandated that studies and reporting be initiated and completed on a set schedule. Make the attempt. Contact several engineering firms. Can't comply after all this? You've made a record of attempting to comply, and the impossibility of performance defense should be available to you in some form. After all, you can't do the impossible? Right?

CONCLUSION

The Florida Legislature, in its wisdom, established rigid performance requirements for condo associations for the undertaking of engineering inspections and the funding of reserves. These requirements were established apparently without inquiring of the structural engineering community in Florida whether the new workload could be borne. At the same time, the Legislature exposed individual directors to liability if they don't meet the proscribed deadlines. The bottom line: try anyway. It should be enough to avoid individual liability.

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