Recently, Florida passed SB 4-D, a new safety regulation for condominium and cooperative association buildings. The law centers around inspection requirements, mandatory reserves and more transparency for unit owners and prospective unit owners on information regarding the condition of the buildings.
Revisiting your budget plans and working closely with your banker to address the association’s priorities and challenges will remain critical in the next few months.
What should property managers or
associations do now?
At Popular Association Banking, we have been advising our clients to engage a structural engineer and a reserve study analyst as soon as they can. Such studies will help estimate the additional costs and the reserve amounts needed. The demand for such projects is also likely to increase in the coming months.
With a better-defined estimate amount, associations can focus on developing a budget planning strategy to fund reserves without having to pass larger assessments to their members. Such planning will also help identify financial gaps and financial solutions to help address those.
What funding options are there to consider short term?
Given the impact of these changes, it is important to communicate with your banking and financial partner early and often. And in those conversations, consider external factors that are outside of your control — inflation, rising costs of labor and supplies, as well as an anticipated spike in demand for the very services your association is considering.
In addition, the rates for insurance policies necessary to have in place have also been hardening. If you are faced with a sudden increase in expenses, consider talking to your financial partner about a bridge loan to fund reserves and alleviate the short-term financial burden, which you put an updated fiscal plan in place.
What about the long-term financial strategy?
As SB 4-D takes shape, continue to plan for what is now expected. Make certain your association budget properly allocates funds for reserves, repairs, insurance and other required expenses. And then develop contingency plans for the unexpected.
For example, consider discussing contingency lines of credit with your banker to help with potential expenses after a hurricane or a tropical storm that require immediate funding (structural damage, debris removal, etc.) We are seeing a lot of such projects going over budget, requiring additional labor and insurance; having a contingency line of credit in place can help alleviate a financial burden without the association having to take out a new loan.
Revisiting your budget plans and working closely with your banker to address the association’s priorities and challenges will remain critical in the next few months. Your financial partner’s knowledge of available options to guide you through them will offer peace of mind for property managers and for the unit owners going forward.