SURFSIDE — Late last year, after years of
delays and disputes, the Champlain Towers South Condominium
Association began a desperate search for $16.2 million to
fix major structural damage that was slowly threatening the
Surfside high-rise — and that may have contributed to the
building's partial collapse June 24.
The obvious place to look was the building's reserve fund — extra money socked away to cover the cost of future repairs. But the account held just $777,000, according to condo board documents — nowhere near enough to soften the blow.
Rescuers search for victims at a collapsed condo building on July 5, 2021, in Surfside, Fla., after demolition crews set off a string of explosives that brought down the last of the Champlain Towers South building.
The law lasted just
two years before it was repealed in 2010, after Robaina left
office. Robaina blamed pushback from real estate lawyers and
property managers, who he said claimed that the law was too
burdensome for condo owners. The legislator who sponsored
the repeal, former state Rep. Gary Aubuchon, a Republican
real estate broker and homebuilder, did not reply to
messages seeking comment.
The repeal left Florida's condo residents less protected than those in nine states that legally require reserve studies, according to the Community Associations Institute, a nonprofit organization that advocates for condo associations. Thirty-one other states, including Florida, regulate reserves in some way — although Florida is one of three states with loopholes that enable owners to opt out of requirements, the nonprofit said. Ten states have no regulations about reserves at all.
Rescue workers search in the rubble at the Champlain Towers South Condo, in Surfside, Fla., on June 26, 2021.
The lack of a
professional reserve study is a departure from what many
experts say is best practice for condominiums, particularly
older ones on the coast — like Champlain Towers South, built
in 1981 — that have been exposed for decades to corrosive
salt and water.
Robaina, who co-owns a property management company, said maintaining healthy reserves "is the single most important action that a condominium board needs to take."
Florida law requires condo boards to maintain reserves for repairs over $10,000, but it does not say exactly how much to set aside. That means condo boards have some flexibility in avoiding saving for repairs that do not need to be made right away.
In addition, the law allows condo buildings to waive the reserve requirement altogether. Once it has passed its annual budget, a condo board can give residents the opportunity to opt out of collecting reserves by a vote of a majority of unit owners. The votes are common in Florida condo buildings, condo lawyers say.
That is what it appears Champlain Towers South did, lawyers and reserve experts said.
The experts pointed to the board's reliance on special assessments — additional fees on top of residents' normal monthly payments — to fund needed repairs. The board imposed a $1 million special assessment in 2016 for hallway renovations and a $350,000 special assessment in 2019 for work on a generator, a fuel pump and a fuel tank. Such lump-sum levies are indicative of a building whose owners have decided not to set aside enough reserves through regular monthly fees, choosing instead to wait until a big-ticket repair is needed to ask residents to pay for it, experts said. Many associations make that choice by repeatedly voting to waive or reduce the funding of their reserves.
"I can't help but think that the building did that for years and years, which is why there was not enough funds available," said Matthew Kuisle, Southeast regional director for Reserve Advisors, which prepares reserve studies. "Why would they do that? So they have lower fees. But in the long run, the fees are a small price to pay."
The shortcomings of that approach started to become clear in 2018, when the board began inspecting the building before a checkup mandated by Miami-Dade County for buildings that reach 40 years old. In an October 2018 report, engineer Frank Morabito alerted the board to "major structural damage" to concrete slabs underneath the building's pool deck and its entrance drive. He blamed a "major error" in the building's construction and years of corrosion. He estimated the cost of repairs at $9 million.
Reeling from sticker shock, the board invited a Surfside building official to its November 2018 meeting. The official told the board that the building was "in very good shape," according to minutes of the meeting. Some residents have said that led them to believe the situation was not dire.
Even so, the board began trying to find a way to repair the damage — and to pay for it.
Disagreements over the costs frustrated board members. Five members quit over two weeks in fall 2019. The condo association has had four presidents since 2018.
By late last year, the board had accepted that there was no safe way forward without doing the massive reconstruction Morabito recommended, along with repairs to a deteriorating roof. Morabito began preliminary work and found that the damage discovered in 2018 had gotten worse. The bill rose to more than $16 million.
The board scrambled for money. It found $707,000 left over from the previous special assessments and $777,000 more in reserves. But a quarter of the reserves were designated for insurance deductibles, leaving $556,000. The board chose not to tap the reserves just in case there was another emergency. That meant the building was short by $15.5 million, which the board voted in April to raise through a special assessment. The cost to residents would be $80,000 to $360,000 per unit.
"A lot of this work could have been done or planned for in years gone by. But this is where we are now," board President Jean Wodnicki wrote to residents before the vote.
By last month, the board had started work on the roof, and it put other repairs out for bid. Responses were due July 7. Two weeks before the deadline, the building partly collapsed.
The board's nearly three-year struggle to start work on the concrete replacement project has loomed over the catastrophe's aftermath. Investigators have not determined what caused the failure; the deteriorating supports are among the possibilities.
Experts say the extent of disrepair documented in the 2018 report raises questions about how the damage went unnoticed previously.
"I read the report, and I wondered how long the building looked that way," said Robert Nordlund, founder and CEO of Association Reserves, a reserve study firm based in California. "Did it look that way in 1998? 2008? Because clearly there was some significant deterioration in that 2018 report."
Documents reviewed by NBC News and NBC Miami, including audits, budgets, financial statements and board meeting minutes, do not indicate when the structural issues noted by Morabito started, though the board did pay to replace leaking pipes in the building’s parking garage in 2016. But the documents do show that the board did not perform professional reserve studies and instead relied on board members to determine how much to set aside for repairs. In 2016, an accountant performing a year-end audit noted that "an independent study has not been conducted to determine the adequacy of the current funding" and that "the estimates for future replacement costs are based upon estimates provided by the budget committee."
Audits conducted by the same accountant in 2017, 2018 and 2019 included the same language. Last year, a different accountant provided a similar disclaimer.
Mars, the lawyer who represents condo associations, said he believes that the note was "the CPA saying, 'We don't have any official documentation to rely on.'"
The accountants who conducted the audits did not respond to messages seeking comment.
Jeffrey Rembaum, another lawyer for condo associations, pointed to figures in the audits that showed that from 2016 to 2020, the board did not update the amount of money needed to replace balconies and concrete. Each year, the board estimated needing $320,000 for the work, even after Morabito's report found that much more extensive and costly repairs were needed.
"We know the building had millions in concrete repairs on the horizon," Rembaum said. "So how did it come up with $320,000 for their current needs? If they'd had a reserve study and an engineer looked at what they had, they would have come up with a higher number. That suggests the board wasn't regularly updating it."
He added: "This is the effect of the Florida Legislature not requiring a reserve study by qualified people."
More than a decade since his short-lived law on reserve studies was repealed, Robaina said he hopes lawmakers will change course and reimpose the mandate.
"This is a window of opportunity," he said, "and unfortunately it took a tragedy that could have been prevented."