By Pamela Babcock
Community associations were rocked by the Champlain Towers South condominium collapse in Surfside, Fla., last June. In the year since the tragedy that took 98 lives, community association residents, board members, managers, and business partners have been asking questions about safety, maintenance, inspections, reserve funds, and more. Legislators, regulators, CAI leaders, housing experts, and others have been examining how to prevent similar tragedies.
Common Ground spoke with volunteers who helped craft CAI's Condominium Safety Public Policy Report about what's changed since the collapse and what worries their clients. We also look at how CAI's recommendations can help address safety concerns and how best practices can be adopted by communities today.
“Community association managers, board members, and business partners have an obligation to do the right thing … and to take care of our buildings and the people inside them," says Mitch Frumkin, RS, a professional engineer and president and founder of Kipcon Inc. in North Brunswick, N.J.
FRUMKIN SAYS the collapse raised alarm bells about building safety, but he believes the landscape for managing and governing community associations needs to change too. The model has historically focused on how a community and the people who live in it are managed. As an engineer who addresses structural safety issues every day, Frumkin has long made the argument that, “The buildings in our communities are just as important to manage as the people who live in them."
Despite proactive CAI outreach on many fronts, Frumkin thinks many board members and managers are still not informed or educated about what they should be doing concerning structural safety in their communities. One reason, he says, is because as a membership association, CAI only represents a percentage of homeowners associations across the U.S. “It's a small tip of the iceberg," he notes.
Another challenge is that many in the news media are unfamiliar with how community associations operate and focus too much on an argument that a fully funded reserve is key to maintaining a safe building.
“Reserve studies don't inspect the building or structure," Frumkin says. A reserve study is a budgeting tool based on cyclical replacements of common area building components. An engineering inspection should be a community's first step, followed by maintenance tied to a good reserve study and hopefully adequately funded reserves.
Frumkin believes CAI's recommendations will go a long way to help solve safety concerns and improve structural integrity by providing knowledge of the problems and by promoting legislation, but he says managers and boards shouldn't wait for legislation requiring inspections to ensure their buildings are safe.
Kipcon does business in the Northeast U.S. and is typically included on requests for proposals sent out to major engineering firms. The firm has received only a few seeking structural inspection bids recently—a number Frumkin finds surprising and disappointing. “That figure is dwarfed by the number that need them," he adds.
Buildings aren't designed for aging, so communities shouldn't think they can keep structures safe inspecting them 20 years after they're built. Inspections should start when the building is built, not when you have a problem, Frumkin recommends.
Likewise, inspections shouldn't just examine buildings; they should include any major structural element owned or maintained by the association that consists of concrete, load-bearing, masonry, steel, or hybrid structural systems, such as heavy timber podium decks. Safety also isn't just a high-rise problem or only for buildings on the coast. After all, a parking garage in a city far from the ocean is likely to suffer structural damage due to cars tracking road salt (technically sodium chloride) into the facility.
Currently, only two jurisdictions in the U.S.—Broward and Miami Dade counties in Florida—require structural inspections for buildings. Both require them when a building is 40 years old and then every 10 years after that. Meanwhile, some U.S. cities, including New York City, have façade inspection requirements for high-rise buildings (not just condominiums.) Most are done on a five-year cycle, but Frumkin says such laws protect people walking outside the building—not those living inside.
Education helps. In March, Frumkin held a webinar on structural inspections, reserve funding, and the new banking requirements for safety evaluations of condominiums for manager and board member clients. Typically, 40 or 50 register, but more than 200 tuned in, eager to get answers. Many had questions about the definition of structural integrity as well as the latest with Fannie Mae and Freddie Mac requirements.
Frumkin praises CAI's quick response following the collapse but says he'd like to see more educational content geared specifically to buildings from a technical angle. Although managers aren't engineers, training may help them spot an obvious problem such as rust stains on concrete or steel beams, or cracking at the edges of balconies.
Over the past year, Lisa A. Magill, a fellow in CAI's College of Community Association Lawyers and an attorney who is of counsel to Kaye Bender Rembaum in Pompano Beach, Fla., says board members have nervously been asking, “Are we doing what we need to do?"
Several insurance carriers are demanding inspection reports before binding coverage or refusing to insure certain properties. Premiums are skyrocketing while carriers seek more exclusions or limitations in coverage.
Meanwhile, mortgage financing is changing. Fannie Mae, Freddie Mac, and the federal home loan banks have implemented temporary guidelines demanding specific disclosures and increased scrutiny of condominium and cooperative loans. Real estate agents and buyers have become “far more analytical and investigatory," while the pool of volunteer board members has dwindled due to liability concerns, Magill says.
The attorney, who consults for about 90 community associations primarily in Broward, Miami-Dade, and Palm Beach counties, says several communities have stepped up and performed structural inspections in the past year. A few are doing corporate and general housekeeping.
Among other things, Magill recommends community associations pull together contracts and documents that reflect repair and maintenance completed, review their reserve study, contact their reserve analyst for an update, and examine recent engineering reports or engage engineers to conduct inspections, regardless of whether the property is due under local requirements.
Magill also encourages boards to evaluate the association's cash position and upcoming projects and to secure emergency lines of credit, if needed. Many clients have already bumped up limits on umbrella coverage and other policies. While most had $1 million in directors' and officers' coverage with a $5 million umbrella, some have increased the umbrella limit to $10–$20 million, she says.
Many clients fret about paying for potential repairs and want to know whether financing is available, if they qualify, and what the loan terms might be.
They want to know what happens if the building needs $2 million, $5 million, or even more in fixes and owners can't pay.
Magill says she thinks implementation of CAI's recommendations would put communities in a much better position to address deficiencies and fund deterioration repairs incrementally, while making costs more manageable.
The first “eye-openers" would come from an inspection, initial reserve study, and maintenance guidelines or recommendations given to the board when a property transitions from developer control as well as continuing disclosures for resales. Yearly disclosures of expected maintenance and repair projects and timelines for work to be done should result in greater fiscal responsibility, while having inspections done earlier will hopefully catch issues before deterioration impairs structural integrity.
Mandating reserve studies and funding plans are likely to reduce financial strain because it's easier to ask an owner to pay $50 a month for a few years instead of $1,800 with 30 days of notice. Knowing there's a nest egg to rely on reduces the temptation “for patch repairs or Band-Aids" that hide deterioration and ultimately lead to higher repair or replacement costs later on, Magill says. “Plus, well-maintained and well-capitalized properties retain or gain value."
To implement best practices, visibility and constant reminders are important for community associations. Invite reserve analysts and engineers to meetings. Have them present case studies highlighting the differences in cost, inconvenience, and problems between forward-thinking communities and those caught by surprise and who were “upset and angry about unexpected repairs," Magill says. Walk the property and tell those you encounter about repair needs and upcoming projects.
“Knowledge is power," she adds. Robert M. Diamond, a CCAL fellow, CAI past president, and attorney with Reed Smith in McLean, Va., says a more holistic focus on structural integrity can only help make buildings safer. Yet as tragic as the collapse was, Diamond says it's important to note that community associations have been in existence since the 1970s, and a collapse such as the one that happened in Surf side is not a common occurrence.
“This is a black swan event," Diamond says. “It's horrible, but it's not as if every community needs to be concerned that the building is going to fall down."
While he concurs with CAI's recommendations, Diamond is concerned legislators eager to address the problem will conflate fully funding reserves with having taken care of structural inspection issues. Reserve studies don't include basic systems such as domestic water and sewer lines, electrical switch-gear, and structural membranes. If reserves are mandated and structural items included, community associations will need to either invest in higher return investments than government- guaranteed instruments or rely on special assessments and loans instead of fully funding reserves.
“Otherwise, I don't know anyone who would want to invest their reserves at a half point interest, particularly when construction and repair costs are going up 8 to 10% and more each year. You're always behind, even if you fully fund reserves," Diamond argues. “If you pass a law that says first you have to get a reserve study, then you have to fully fund that reserve, then you add in the structural elements, no community association would be able to afford that."
Pamela Babcock is a writer and editor in the New York City area.
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