An Early Death for Old Condos

An Early Death for Old Condos

by Travers Hartnett

All buildings, including Florida residential condominium buildings, have a useful life—until the cost of maintaining the building exceeds the cost of replacing it. While condos may continue using their buildings past their useful life, the direct and indirect costs to maintain a property beyond its useful life will escalate until they become unaffordable to unit owners. We should not be surprised to learn many of our older condominiums are dying prematurely.

New Florida condo buildings typically start with a useful life of between 50 and 100 years, and buildings constructed with higher-quality materials usually have longer lives. You can reliably confirm the construction quality of a condominium by reading its latest property appraisal. While quality matters, the useful life of a condo building over time depends more on its maintenance, finances, physical environment, building codes, and government regulations.

Routine and periodic inspections, along with preventative maintenance, are the critical glue necessary to preserve and extend the useful life of a condo building. Frequent inspections identify issues that require corrective action before significant deterioration occurs. Champlain Towers South was only 37 years old when they first discovered water penetration in their basement-level parking garage by inspection. Three years later, without adequate repairs, the building collapsed. While the cause of this highly unusual collapse is still unknown, it's crucial to understand that inadequate and deferred maintenance can significantly reduce the useful life of a building by 25 to 50 years.

Condo associations are unit-owner organizations that depend on each unit owner to share their percentage ownership of community expenses. The economic stability of these associations is crucial for funding costs like building maintenance, which is necessary for a long, useful life. However, as condo buildings age, so do their owners, many of whom stay in place and retire on fixed incomes. Condo boards cannot spend unlimited money on repairs and maintenance that unit owners cannot afford.

While buildings designed for Florida can have a long, useful life, deterioration by wind and water presents the most important and ever-present risk. Hurricanes and flooding can strike anywhere in Florida, destroying communities and severely reducing the useful life of condos. Coastal Florida's rising saltwater tides, humidity, and salt air can damage concrete, including foundations, and accelerate the deterioration of building materials. Intense seasonal sunlight damages roofs and exterior building surfaces, resulting in costly leaks. Condos must protect their building openings from wind and water intrusion to maintain their useful life.

While strict new building codes requiring opening protection by impact-resistant windows, doors, shutters, and reinforced roofs began in South Florida in 1994, older condos were grandfathered and not required to comply. This turned out to be a costly mistake. Because most of Florida’s 17,000 condos were built before new building codes, many, if not most, condo associations today have inadequate protection from wind and water.

On May 25, 2022, following the collapse of Champlain Towers, the Florida Senate passed Senate Bill 4-D requiring 25 and 30-year-old condominiums and cooperatives over three stories high to successfully pass a comprehensive structural inspection every ten years performed by a licensed architect or engineer to ensure the building safety and assess the property's structural condition. Along with the inspection, a new Structural Integrity Reserve Study, SIRS, is required to calculate the useful life of building components and their replacement cost and establish minimum mandatory reserves for future funding of repairs and replacements.

SIRS mandatory reserves are causing financial difficulties for condos, especially older condos. Before 2022, condo reserves could be waived by unit owners. As a result of under-reserving for many decades, older associations are now increasing their monthly assessments by up to 200% and announcing five-figure special assessments to meet the minimum cash reserves required by SIRS. Unit owners unable to afford these increased monthly fees are forced to sell their units, and property values are falling in some hard-hit communities.

To make matters worse, since Hurricane Ian struck Florida in 2022, condo building insurance rates have been at an all-time high, especially for condos built before 1994.  100% replacement cost wind insurance is mandatory under Florida Statute 718, and it is not unusual for loss-prone older condos to pay two to three times the cost of insuring a newer building. Some cash-strapped older associations are making the risky decision to underinsure their buildings, violating Florida law, impairing owner financing, and putting their unit owners at severe risk of financial loss. The only way unprotected condos can access affordable wind insurance is to invest in upgrading their opening protection.

While money is tight, there is some hope of financial help. On July 1, 2024, Governor DeSantis signed the My Safe Florida Condominium Pilot Program, a grant program for condo associations to help pay for owner upgrades for opening protection, including hurricane windows, doors, shutters, and roofs. While this pilot program has limited money and maximum project caps, it will likely help fund upgrades for a few hundred smaller condos located within 15 miles of the Florida coast. There is also the possibility the program will be expanded in the future. For more information on who qualifies for this grant program and how to apply, visit https://msflh.com/condos/.

As of today, however, all of the known factors affecting the useful life of older condominiums are heading in the wrong direction. If they continue, many of our older condos will die prematurely..

Travers Hartnett serves as CondoExec’s Editor in Chief. Travers holds more than 19 years experience providing insurance risk management services exclusively to Florida community associations. As a Certified Employee Benefits Specialist from the Wharton School and formerly a Human Services- Board Certified Practitioner, he has served on multiple boards, both as a volunteer and President.