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.

For associations that have been waiving or partially funding their reserves, the new law may result in large budgetary increases and create a financial burden on unit owners.

SB 4-D at-a-glance

The new legislation primarily focuses on the following:

  • Building inspections for community buildings in all 67 counties that are three or more stories in height. Mandatory “milestone inspections” of structural integrity by an architect or engineer when a building turns 30 years old (or 25 years if located within three miles of a coastline) and every 10 years thereafter.

  • Associations are required to complete a structural integrity reserve study every 10 years for each building in an association that is three stories or higher.

  • Effective December 31, 2024, no unit owner-controlled condominium or cooperative can vote to waive or partially fund the reserves. All community associations, regardless of size or location, must adequately fund reserves pursuant to the reserve study required.

  • Mandatory transparency to unit owners. The inspection report results must be provided to local building officials and the association and requires an inspector-prepared summary to be provided to unit owners.

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.