The effects of the collapse of the Surfside Champlain Towers have led to recent adjustments. Read this changes to the condo questionnaire and the effect of recent condo legislation

1. Impact of Recent Condo
Legislation and Changes to
Condo Questionnaire
James “Jamie” Marx

2. Recent Changes are a result of repercussions from
the Surfside Champlain Towers Collapse.
2. Senate Bill S-4, Additional Provisions for
Chapter 718 regulating condo associations
1. Changes to lending guidelines required
by Freddie Mac and Fannie Mae; and

3. Lending Restrictions
Recent Revisions to Condo Questionnaires used for Institutional Financing.

4. Lending Restrictions
Fannie Mae – Lender Letter (LL-2021-14)
“In the wake of the tragic collapse of the Champlain Tower in
Surfside, Florida, residential buildings with aging infrastructure and
significant deferred maintenance are a growing concern around the
nation. This concern is expected to increase over the next decade ...”
Lender letter

5. Lending Restrictions
Fannie Mae – Lender Letter (LL-2021-14)
• Effective for loans purchased on or after January 1, 2022.
• Also recommending that lenders review available inspection,
engineering, and other reports from the past 5 years.
Important Dates
• “Loans secured by units in condo and co-op projects with
significant deferred maintenance or in projects that have received a
directive from a regulatory authority of inspection agency to make
repairs due to unsafe conditions are not eligible for purchase.”
Requirements
• To routine maintenance items
Not applicable

6. Lending Restrictions
Historically questionnaires for Freddie Mac and Fannie Mae have
included questions in the following categories:
a. Basic Project Information,
b. Project Completion Information (when not complete),
c. Newly Converted or Rehabilitated information (when applicable),
d. Financial Information,
e. Ownership, and
f. Insurance Information and Financial Controls

7. Lending Restrictions
Updated Disclosures requiring more information concerning:
 Inspections,
 Structural soundness,
 Financial ability to pay for deferred maintenance and replacement.

8. Lending Restrictions
Condo Project Questionnaire:
1. When was the last building section by a licensed architect, licensed
engineer, or any other building inspector?
2. Did the last inspection have any findings related to the safety,
soundness, structural integrity or habitability of the project(s)
building(s)?
3. Is the HOA/Cooperative/Corporation aware of any deficiencies related
to the safety, soundness, structural integrity, or ability of the project’s
building(s)?
4. Are there any outstanding violations (zoning ordinances, codes, etc.)
related to the safety, soundness, structural integrity, or ability of the
project’s building(s)?
5. Are violations anticipated for the future?
6. Is there a funding plan for deferred maintenance?

9. Lending Restrictions
More questions:
7. Schedule for deferred maintenance?
8. Reserve study completed?
9. Current reserve account balances?
10. Current special assessments?
11. Planned special assessments?
12. HOA loans?

10. Lending Restrictions
Questionnaires Require:
 Five pages to be completed by the association or management,
 Interpretation of governing documents,
 Disclosure of all litigation,
 Evaluation of multi-uses and insurance
 Though stated as “temporary,” there is no end date in the printed
materials.

11. Lending Restrictions
Scope of Regulations:
 National in scope,
 This applies to all condominiums with five units or more,
 Limited to mortgages purchased by Freddie Mac and Fannie Mae,
which does not buy all mortgages, but guidelines are likely to impact
other loans,

12. Lending Restrictions
Anticipated (and for many, unanticipated) consequences:
 The additional information required is likely to overwhelm
management, counsel, other professionals and condo board members.
 Units at condominiums with critical repair needs will not qualify.
 Recalcitrant management, association counsel and board members (who
choose not to fully answer the questionnaire) may cause many units not
to qualify for financing, and this in turn may cause contractual
problems for buyers (putting their deposits at risk); particularly if
they discover this after being approved for financing

13. Lending Restrictions
More consequences:
 As stated in Michael Gelfand's excellent article in ActionLine, Summer
2022, Surfside's Repercussions … "The true cost of homeownership
may be a stark wake-up call!"
 Maintenance costs, including insurance costs, will likely increase
substantially.
 There will likely be more condominium terminations,
 There may be a significant decline in sales prices.

14. Lending Restrictions
Opportunities and take aways:
 For cash buyer's, "cash has always been king" but this is likely to be
even more so for those buyers that are interested in units that do not
qualify for institutional financing. With opportunity comes risk, and
these buyers will be well advised, preferably by legal counsel, to
conduct appropriate due diligence.
 Condo associations will be similarly well advised to conduct their
due diligence (reviewing the questionnaire requirements, and
documenting and closely monitoring maintenance and reserve
requirements) and to address these issues early and often.

15. Lending Restrictions
Contractual Considerations
 These considerations should be proactively addressed in purchase and
sale transactions for the purchase of condominium unit(s).
 Buyers should seek to obtain approval of the condo unit at issue, which
necessitates completion of the condo questionnaire in a manner that is
satisfactory to lender, prior to the expiration of the "Loan Approval
Period." (as such term is defined in the FR/BAR Contract documents).

16. Lending Restrictions
Suggestions for FR/BAR Contract; Additional Language or Addendum
 If Buyer is approved for financing pursuant to the FR/BAR Contract prior to
the expiration of the Loan Approval Period but the lender has not yet
determined if the building/results from condo questionnaire will be acceptable,
there is a risk that if the building does not qualify that Buyer will be deemed to
be in default and Seller will make a claim to the deposits forthwith.
 Suggest adding language to the contract similar: ie, If Buyer is approved
for financing but the condo association fails to complete the condo
questionnaire or to otherwise complete it to Lender's satisfaction, or if the
building is not approved by the Lender for any reason, this shall be deemed to
be a Property Related Condition and Buyer will thereupon have the right to
terminate the Contract and receive the return of all deposits forthwith.

17. Lending Restrictions
Sources for additional information:
 Fannie Mae Lender Letter (LL-2021-14).
 Fannie Mae Form 1076 Condo Project Questionnaire and Addendum.
 Freddie Mac Condo Project Questionnaire and Addendum.
 Real Property Section of the Florida Bar, ActionLine, Summer 2022
Article, Surfside's Repercussions Swamp Residential Resales?
Following the Money as Lending Restrictions Lead to Reforms,
Michael J. Gelfand

18. SENATE BILL S-4:
Legislation passed in response to the Champlain Towers disaster.
 Legislation took effect on May 26, 2022.
 Effects, and will result in greater costs, for all condo or co-op buildings
that are three stories or higher.
 Effects both developer-controlled and owner-controlled associations,
with greater impact to older buildings and buildings that have
previously waived reserves.

19. SENATE BILL S-4:
2 New Mandatory Requirements
1. Periodic Milestone Inspections – Not a change to the Condo Act, but a
new section to the FL Building Code entitled "Mandatory structural
inspections for condominium and cooperative buildings."
2. Structural Integrity Reserve Studies – Reflected as new provisions in
Chapter 718, Fla Statutes.

20. SENATE BILL S-4:
Milestone Inspections – WHEN?
 Where CO was issued on or before 7/1/92, the initial Milestone
Inspection must be performed by 12/31/24. Fla. Stat. 553.899(4).
 Except as above, by 12/31 of the year in which building reaches 30
years of age, and each 10 years thereafter. Fla. Stat. 553.899(3).
 If within 3 miles of the coastline, at 25 years, and each 10 years
thereafter. Fla. Stat. 553.899(3).
 Within 180 days of notice from a “local enforcement agency” (Fla.
Stat. 553.71(5), 553.899(6).

21. SENATE BILL: S-4
Who must perform the milestone inspection
 Engineer or architect licensed to practice in Florida.
 Report must be submitted by the engineer or architect to the local
enforcement agency. Fla. Stat. 553.899(2)(a).

22. SENATE BILL: S-4
Milestone Inspection has two phases:
1. Visual examination of habitable and non-habitable areas of the building
to provide a qualitative assessment of the structural conditions. If there
is no finding of signs of substantial structural deterioration, phase two is
not required. Fla. Stat. 553.899(7)(a).
2. It may involve destructive or nondestructive testing at the inspector’s
direction. Fla. Stat. 553.899(7)(b).

23. SENATE BILL: S-4
Milestone Inspection Report
 Upon completion, engineer or architect must submit a sealed copy of
the report with a separate summary of material findings and
recommendations to the Association and building official that has
jurisdiction. Fla. Stat. 553.899(8)(a)-(f).

24. SENATE BILL: S-4
Association Requirements with Inspection Report
 Distribute to each Unit Owner. Fla. Stat. 718.112(2)(h).
 Post a copy of the summary on the condo/co-op property. Fla. Stat.
718.112(2)(h).
 Publish the full report and summary on the Association’s website. Fla.
Stat. 718.111(12)(h).
 Must be maintained for 15 years after receipt. Fla. Stat.
718.111(12)(2)15.
 The willful failure of an Association to complete the Milestone
Inspection as required by statute is a breach of fiduciary duties of
officers and directors to the Unit Owners. Fla. Stat. 718.112(2)(h).

25. SENATE BILL: S-4
Structural Integrity Reserve Studies
 Defined in Fla. Stat. 718.103(25). Required for future major repairs and
replacement of common areas. May be performed by “any person qualified to
perform such study” but the visual portion must be performed by a licensed
engineer or architect.
 Must state the areas, estimated remaining useful life, estimated replacement
cost or deferred maintenance expense, and estimated reserves for each item.
 Must include at a minimum: roof, load bearing walls, floor, foundation, fire
proofing and systems, plumbing, electrical, waterproofing and painting,
windows, and any other item that may cost in excess of $10,000 or that may
negatively impact any listed items or as determined by engineer or architect.

26. SENATE BILL: S-4
Timing and enforceability
 For buildings existing on or before 7/1/22 that are owner controlled, the
Structural Integrity Reserve Study must be completed by 12/31/24.
 Association’s must complete every 10 years after the condominium’s
creation.
 The failure of an Association to complete the Structural Integrity
Reserve Study as required by statute is a breach of an officer’s and
director’s fiduciary relationship to Unit Owners. Fla. Stat.
718.112(2)(g)(4).

27. No more waivers
 Effective 12/31/24 members of a unit owner-controlled association may
not determine to provide no reserves or less reserves that required by
the revised statute. Fla. Stat. 718.112(2)(g) and (b).
 Effective 12/31/24 members of a unit owner-controlled association may
not vote to use reserve funds, or any interest thereon, for any other
purpose than their intended purpose. Fla. Stat. 718.112(2)(f) and (3).

28. Further Requirements:
 Structural Integrity Reserve Studies must be maintained for at least
fifteen years after the study is completed as part of the accounting
records; and this includes any other structural or life-safety inspection.
 A renter has the right to inspect and copy these reports.
 Unit owner that is not the developer must provide a current copy to
each prospective buyer along with the milestone inspection report. Fla.
Stat. 718.503(2).
 These reports must be posted on the association’s website. Fla. Stat.
553.899, 718.301.

29. If that wasn’t enough…
 Community Association Managers must comply with mandatory structural
inspections. Fla. Stat. 468.4334(1)(b).
 On or before 1/1/23 (now), condo associations existing before 7/1/22 must
provide to the Florida Division of Condominiums: number of buildings that are
three stories or higher, total number of units in all buildings, addresses, and
counties of each building; whereupon the Division must post the list on its
website.
 Association must provide updates of any changes within six months from any
such change.
 The Division has jurisdiction to enforce compliance with milestone inspection
and structural integrity statutory requirements. Fla. Stat. 718.112(2)(g),
718.501(1).

30. And…
 A local enforcement agency may prescribe timelines and penalties with respect
to compliance. Fla. Stat. 553.899(10).
 A board of county commissioners may adopt ordinances to require a
condominium to schedule repairs for substantial structural deterioration after a
phase two report. Such repairs shall be commenced within 365 days after
receipt of the report. Failure to do so shall require a review to determine if the
building is unsafe for occupancy. Fla. Stat. 553.899(11).
 Florida Building Commission shall review the milestone inspection
requirements and make recommendations to the legislature and governor by
12/31/22.

31. Unintended Consequences
 May displace thousands from their units and result in a substantial number of
condo terminations.
 Many unit owners will be unable to afford the increase in assessments resulting
from the new mandates.

32. Additional Sources
 Senate Bill S-4.
 Florida Bar Journal, November/December 2022, Senate Bill 4-D and the
Champlain Towers South Collapse: A Problem in Response to a Problem,
Martin A. Schwartz and Kevin M. Koushel