The Smart Board & Property Manager Legal Guide: Florida SB 154 - The Condominium Safety Legislation "GLITCH" Bill

What we've seen in our practice is that there's still a lot of confusion among our clients and others about what exactly is required of them. It's really important given some of the guidance that we've gotten from DBPR local building officials since the passage of this bill, that we wanted to make sure that everybody is aware of these deadlines and that you're on task and on point in complying with them because failure to comply could be problematic in some instances. So, what we're going to cover today is we're going to start with milestone inspections. We're going to talk about the who, what, where, when, and why of milestone inspections. We're going to move to the Structural Integrity Reserve Study inspections and process, which are two very different studies.

We'll talk about the same, who, what, why, when, and where of that. Then at the end of this, Cindy and Jim and Jennifer are going to talk a little bit about the dreaded reserve funding questions that we keep seeing because there's a lot of confusion about that. Hopefully, we'll get some legislation to clear that up, but as Alan said, it doesn't seem like it's going to come in imminently. So, let's jump into milestone structural safety inspections. This was the key piece of legislation that came out of the Surfside tragedy. This was where the legislature said, "Look, for certain buildings, we want to make sure that those buildings are being inspected by qualified professionals relating to their structural integrity on some timeline."

Okay, so let's first start with what is a milestone structural safety inspection. The statute generally defines this inspection as a visual inspection of a residential condominium building for evidence of substantial structural deterioration or substantial structural weakness. So, let's unpack that. Round one, phase one, we'll talk about phases in a second. That first phase of milestone inspection report is a visual inspection, and the inspector is looking for evidence of substantial structural deterioration or substantial structural weakness. Now, what do those terms mean? They're pretty broad, substantial deterioration or weakness.

The statute does provide some guidance on this, and it says in terms of what these two phrases mean, we're really looking for evidence of conditions that negatively affect the building's general structural condition and integrity. So, there are a lot of things that may impact the structure of a building, stucco cracks, some concrete spalling, and things like that. But the key decision or the key analysis for the professional here is does this negatively affect the building's general structural condition and integrity? That is a professional's duty to determine, not directors, not managers. This is meant to be defined by and inspected by qualified professionals. So, we're going to talk about that. Who does these inspections?

According to the statute, this milestone inspection, this visual inspection must be performed by a team of professional or can be performed by a team of professionals, but they must be under the direction of a licensed Florida engineer, professional engineer or architect. So, if you are getting a milestone inspection proposal from somebody, from anybody, one of the first questions you need to ask is, who's in charge of this process? Is there an architect or an engineer who is going to be guiding this process? If it's a team of people, is there an architect or an engineer at the head of this? All right.

Now the statute says architects can do this. I'm not going to argue about whether or not that's true, but I would note that in other provisions of the Florida statutes, there are definitions as to what architects can do and what engineers can do. As a general proposition, architects cannot provide engineering services. So, I'm not going to tell you whether or not you should have an architect or an engineer or if you're getting a proposal and this team is led by an architect. I can only say that one of the things you need to talk about with that architect is, "In their experience, do they have experience looking at these structural elements of buildings?" Because as I said, as a general proposition, architects cannot perform engineering services.

So, we're going to talk about the thing that a lot of people always ask and talk about, well, what is a story, right? Because we know that milestone inspections apply to residential condominiums that are three or more stories in height. So, what is a story? The statute doesn't define it. What the statute does effectively say is that whatever is deemed to be a story under the Florida Building Code is a story essentially for purposes of this milestone inspection regime. So, things like covered ground floor parking levels, even underground parking, although we don't find that very often in Florida, can be considered part of that analysis of whether the building is three stories or higher. So, what I want you to understand is that this does not necessarily mean habitable floors.

You may have covered parking on the first level and two habitable stories above it, and that could be and probably is a three-story building for purposes of milestone inspection. If you're in doubt, consult an engineer because you may have situations where you have two stories but you have a mezzanine level or maybe you have a story and then a penthouse unit above. Is that three stories? Is that two stories? Just looking at it, laypeople aren't going to be able to make that decision. So, this is really another decision. Don't go it alone. Consult an engineer who does these milestone inspections to determine whether your building falls under this requirement.

So, let's talk about what is inspected in this milestone study and what is inspected is for any residential condominium building, three stories or higher. Let's stop there. Commercial condominiums, not part of this. This is only for residential condominiums. For any residential condominium building three stories or higher at a minimum, a phase one visual inspection of the load-bearing elements and the primary structural members and primary structural systems as those terms are defined in Florida Statute 627.706, that's what's inspected. We talked about this earlier. If substantial structural deterioration or substantial structural weakness is found, the engineer says, "Okay, I'm finding a problem."

That's not the end of the day. If the engineer finds that, you then must move to a phase two study. The engineer then must engage in a separate study which may include destructive testing, which will report the nature of the structural defects, whether the defects pose an unsafe or dangerous condition, and the professional's recommendation for remediating the defects that they found. Okay, so let's make sure we're clear on that. Phase one is the visual inspection. If the engineer or architect says, "I don't find any problems," you're done. If the engineer or architect says, "Oh, I'm finding some problems here," you have no choice. You've got to move to phase two.
Phase two is where that engineer or architect is now going to delineate what the problems are, whether they pose a danger, and how to fix them. Now, there are a couple of things that we need to understand about this milestone, and I've got them in red at the bottom of this slide that you're looking at. First of all, there is an exception for one, two, or three family buildings with three or fewer habitable stories above ground. You have a lot of these in Florida, these maybe villa-style or I call them villa-style buildings, but maybe there's a different term for them. So, if there's no more than three dwellings in a building, even if it's three habitable floors, that's excluded from this milestone. So, what we're really looking at is more of the tower-type buildings. Okay?

Now you're going to ask me, what about mixed use? We've got a lot of condos or buildings that are owned by, let's say, a commercial owner. There's a portion of it that's a condominium that is managed by a separate association, and then maybe there's a hotel or maybe there's commercial space or whatever the case may be. You're not exempt from this. Those buildings are not exempt. If they're three stories or higher, they still must be studied. But both the owner and the association are equally responsible for ensuring that the milestone inspection is done, but they're each only responsible for the cost attributable to the portion of the building they maintain. Now, the big question, when is this due?
So the statute first sets up a regime that basically says every 30 years from when the building was completed by virtue of the certificate of completion or certificate of occupancy, we've got to get one of these studies done. However, for any building that was completed prior to July 1st of 1992, those buildings have until the end of this year to complete their phase one study, milestone inspection study. Okay, so if your building was CO'd, completed before July 1st, 1992, the clock is ticking. You need to get this done. If your building reaches 30 years of age between July 1st of 2022 and December 31st of 2024, so the end of this year, you have until the end of next year to complete your phase one study.

Also, keep in mind that if your building is near water, the local building official can determine based on a number of factors that they want you to do this study more frequently than 30 years. They can reduce it to 25 years if they feel the need to that there's good cause for doing that. Now what we've learned through dealing with this for a little while now is that first of all, this process is governed and enforced by your local building officials. So, wherever you're located, whatever building department has jurisdiction over your buildings, they're the ones who are enforcing this. They can extend. Let's say you've got to do this before the end of this year and you're late in getting to it and you're running up against this deadline.

The local building official can extend your deadline, your time to complete this for "a showing of good cause". But at a minimum, you have to demonstrate to the building official that you've entered into a contract with an engineer or architect to do this work. So, don't not go to the building official at the end of the year on December 30th and say, "Hey, we need a little more time to get our milestone inspection done." Then the local building official is going to say, "Show me your contract," or at least they should. That's what they're commanded to do by the statute. If you don't have that contract signed, you're going to have a problem.

Because these building officials are just getting up to speed on this, you may have to do this before the end of the year, but you may not have gotten any notification by the building official that it needs to be done. For those folks who may not have it due until next year or the years or a couple of years after that, at some point, the building officials are going to catch up with this and they're going to start providing notifications as to when your building needs to have this phase one study done. If you get that notification from your building official, you must provide it to your members within 14 days. Your members have a right to know you've been told to do this study and then you have 180 days to complete it.
By next year, I would expect that if your milestone report is due by the end of 2025, you're going to start getting these notices from your building official. When they tell you that it needs to be done, you got to notify members. You got to start working on that process pretty quickly because the timeframe is 180 days to get it done. Then once you've done your first one, every 10 years thereafter, you're going to have to get another phase one milestone inspection completed. So, this is an ongoing process over time. Now you need to make certain disclosures of this. So, you get your phase one report complete. Even if it's clean, you get a clean bill of health from the engineer or the architect, and you don't have to go to phase two, you still have to disclose this report to your members.

So, every unit owner in your condominium must get a copy of a summary of the report prepared by the professional, the engineer, or the architect. So, they actually have to get a summary, got to give them that. It must be posted on the property. If the condo is required to maintain a website and there's new legislation around who needs to maintain websites, so make sure you're up to speed on that, but we'll cover that in a different time. But if you have required to maintain a website, then the full report and the summary report must be posted up on the website. These are official records. They must be maintained for 15 years.

The report summary must be distributed to unit owners within 45 days, and you provide it in whatever manner that the unit owner has elected to receive notices from the association. Now, the report also goes to the local building official. So, if you don't get a clean bill of health and you've got to move to phase two, you're not going to be able to hide from it. The local building official is going to know and then they will set the applicable deadlines for completing phase two. So, the building officials are going to monitor this pretty actively going forward. So, you need to be on top of these deadlines. Okay, that's milestone inspections. We're going to now switch to Structural Integrity Reserve Studies. That was the other big key feature of this safety legislation.

Let's differentiate the difference between the two different studies, milestone and SIRS. We're going to use SIRS. That's the acronym for Structural Integrity Reserve Study. Milestone is a safety inspection. SIRS is a reserve study. It's a separate report from the milestone report. Its purpose, frankly, is to determine or define the recommended reserves for replacement or deferred maintenance of certain components of the common elements of a residential condominium property. So, as I've put in the red, unlike a milestone inspection, this is not a safety inspection. It is a reserve study. It establishes required reserves to be collected for full funding of replacement or deferred maintenance of certain key components of a residential condominium building's common elements.

Mixed-use buildings, again, this still applies, but the SIRS study only has to be directed to the portions or components of a mixed-use building which are submitted to the condominium. So, the SIRS study does not have to look at those portions of the building, which are not submitted to the condominium or portions of the building maintained by someone other than the condominium association. So, you only have to do the SIRS study on the portions of the building that is three stories or higher, which the condominium association maintains and which are submitted to the condominium association. So, who has to do a SIRS? Well, it used to say in the first round of legislation, it said the same thing as milestone. It had to be an architect or engineer.

But being that this is a reserve study and not necessarily a safety study, the second round, the Glitch Bill opened this up a little bit. So, the Structural Integrity Reserve Study must include a visual inspection of the condominium by an engineer or architect. So, you can still use the engineer or architect, but there are also certain reserve appraisers that can do this inspection as well. If the person is a CAI certified reserve specialist or an APRA certified professional reserve analyst, they can also do the visual inspection portion. So, we've seen these being done two ways.

You have these certified people who are doing the inspection and then doing the reserve calculations, but sometimes we're still seeing engineers do the inspection and then working with other reserve professionals who are helping provide the reserve calculations and funding requirements. But as long as you have one of these CAI or APRA certified folks, you don't necessarily need the engineer in that process. Again, SIRS applies to buildings, condominium buildings that are three stories or higher, residential condominiums that are three stories or higher. Same thing as in milestones, same definition of what a story is. Talk to the professionals about whether your building is three stories or higher.
It has the same exception, for one, two, or three family buildings with three or fewer habitable stories above ground. So, what is inspected in a SIRS? For any residential building, condominium building, three stories or higher, it's a visual inspection of the condominium property to establish the estimated remaining useful light, the estimated replacement cost or deferred maintenance expense, and a recommended annual reserve amount for each item being visually inspected. So, you folks are probably familiar with these terms. You've done reserve studies before, and this is no different than a reserve study except in the things that must be looked at.

So, for a SIRS, the things which must be looked at and reserved for are the roof structure, including load bearing walls and other primary structural members and primary structural systems, the fireproofing and fire protection systems, the plumbing system, the electrical system, waterproofing, exterior paint, windows and exterior doors. We get a lot of questions about, well, our windows are not maintained by the association. There's not a definitive answer on whether or not the windows in that case would have to be part of this SIRS study, but the general consensus, and I think DBPR supports this.

Cindy can correct me if I'm wrong, but I think the DBPR guidance on this does somewhat indicate that if the windows and doors are part of the association's maintenance and repair obligation, they need to be in this SIRS study. If they're not, they can be excluded. But at the end of the day, what you really should be doing is talking with these professionals who do these reports, letting them look at your declaration and letting them decide the extent to which this study needs to be done. It also includes the catchall any other item that has a deferred maintenance or replacement expense that exceeds $10,000 and the failure to replace or maintain such item will negatively affect the other reserve items that are studied or that need to be studied in the SIRS.

So, if they negatively impact the roof or the fireproofing or plumbing and electrical, those things also need to be looked at. Okay. So, when is the SIRS due? This is where it gets really confusing, a lot of confusion around this. In the Glitch Bill, it made a change so that it now provides that owner controlled associations, which turned over prior to July 1st, 2022. So, if your condominium has the buildings which are required to be looked at and it was under owner control prior to July 1st of 2022, then your first SIRS report is due at the end of this year, on or before December 31st, 2024. If you have until December 31st of 2026 to complete your first milestone, you can delay doing this SIRS until the same day.

So, we've gotten a lot of questions from condominiums about, "Do they really need to do this SIRS report if they're not 10 years old yet, right?" I mean, SIRS says every 10 years from when the condominium was created, which by the way is when the declaration is recorded. So, a lot of folks are saying, "Yeah, well, we are under owner control before July 1st, 2022, but our condo is not 10 years old." There's a little bit of an inherent ambiguity in the statute, but we cannot get around the standalone provision, which does appear in the statute, which says owner controlled associations or condominiums, which were owner controlled prior to July 1st, 2022, have until the end of this year. So, I would not make the mistake of saying, "Well, I'm going to interpret it the other way."

I would definitely be looking to get this study done before the end of this year. Then once you do it, you've got to do it every 10 years after. Now, there's an assumption in the statute because some folks will say, "Okay, well, we didn't turn over until after July 1st, 2022. So, what do we have to do?" The assumption here is that after July 1st of 2022, when the statute went into effect, developers may no longer waive or reduce funding of the SIRS reserve items. So, the assumption is that developers are going to here and after be required to fully fund the SIRS reserve items, and developers still have to provide a turnover inspection report and an audit of the operating reserve accounts at turnover.
So, I think the assumption from the legislature here is that because of the full funding requirement, because of turnover inspection report that's required for those condominiums at turnover after July 1st, 2022, they're on the regular 10-year from creation track at that point. As I've noted down here, creation of the condominium is when the declaration was recorded, which is different from milestone, which looks at when the buildings were completed. So, you get these reports. First of all, they're official records. They must be maintained in official records for 15 years. If the condo is required to maintain a website, the SIRS study must be posted on the website.

Now, here's what we've learned from DBPR. First of all, DBPR has required every condominium in Florida to report key facts about its buildings. You may have gotten material from them asking you to provide effectively a census. So, they know whose buildings are three stories or higher and who is required and not required to get a SIRS. So, if you have to get one, you need to do it for a variety of reasons, but one of them is that it needs to be reported to DBPR in order to avoid possible enforcement action for noncompliance. Do you have to distribute the SIRS to owners directly? Well, it's got to be posted on your website if you have to maintain a website. It has to be put into your official records.

I don't believe the statute has a specific notice requirement to members, but presumably owners are going to have it anyway. Because when your next budget is up for adoption, because of the restrictions, which Cindy will talk about in a minute, the restrictions on waiving or reducing reserve funding, that's going to be out in the open during budget adoption process. Again, we're going to get to this in a little bit more detail in a couple minutes, for any budget adopted on or after December 31st of 2024, if you've got a SIRS study completed, any budget you adopted on or after December 31st of 2024 must fully fund the reserves for those items that are studied and reported on in the SIRS report in the amounts recommended by the reserve report.

We get a lot of questions. We got our SIRS report done. We don't like it. Can we determine that the reserve amounts should be different than what the study says they should be? Folks, the statute is pretty clear. It says you need to fully fund those reserves in the amounts and based upon the recommendations and findings in the SIRS study. We also get a lot of questions. Can we get a different SIRS study done? We don't like this one. I suppose you could. It may not be a great idea because all you're doing there is opening yourself up to a potential lawsuit by a member who says, "Well, there was nothing wrong with the first one. So, why did you get a second one done? Why did you spend that money? Which one do we decide is the right one?"

That's probably not from a liability standpoint the greatest decision either. So, choose your SIRS professionals wisely, communicate them with them effectively. Make sure that they're getting all of the information they need because you're by and large going to be stuck with funding whatever those reserve amounts are that they determine should be funded going forward. All right. That's it for milestone inspections and SIRS. The legislation does have a bunch of stuff in there about reserve funding. We're going to talk about that real quick. So, I'm going to turn it over to... I forget who's handling the next slide, but just jump in.

Cindy Hill, Esq.:
That's all right, Jon. We're going to reserve funding and I'm going to handle these first two, A and B, alternative funding method and component versus pooled funding. Then I'm going to turn it over to Jim Turffs. So, next slide please for the alternative funding. Alternative funding as a practical matter really means that what are you going to do to get some funding for these reserves other than obviously assess your owners? One of the options is potentially to get a loan. There are downsides, of course, the same downsides to any loan. You're going to pay interest, you're going to have to go through closing costs.

You're probably going to have to get your attorney involved to get an opinion letter, but that is a viable option that can be considered if the funding for these SIRS amounts looks really terrifying, it's going to be a significant burden on your owners. Now, one of the reasons we used alternative reserve funding though for this particular slide is there is a provision in the statute that I want to be quite clear is not going to apply to most anyone, but it is there. The reason I want to bring it up is I do get clients who ask about, "Oh, we heard something about alternative funding," or "There's some funding the division can approve." Well, that alternative funding that's in the statute is for multi-condominiums with at least 25 condominiums.

So, if any of you listening today, because we do have quite the broad audience, if that applies to you, the website for the Department of Business and Professional Regulations, Division of Condominiums, Timeshares and Mobile Homes has a particular part of its website that can guide you through that process. You can always pick up the phone and give them a call. They are a public entity. They can't give you legal advice, but they can guide you as to how that process might apply to you.

But again, that's going to be only a minority of those, at least in the Tampa Bay Greater Area that they're going to have that apply, South Florida probably more, but I just want you to be aware those who are listening that that's an option, but it's not really an option that's going to apply to most anyone around our local area. Okay, next, the component versus pooled funding of reserves. Your component or what's also called your straight line funding of reserves is your... Let's just call it the statutory presumption, is that you're going to be funding your reserves and this is for all reserves. I'm giving this general definition. This applies whether it's SIRS or whether it's your other reserves or the reserves that you've been compiling now for decades, depending on how old your condominium is.

Your straight line component reserves are where you have a reserve line item literally for each item. You have one for the roof, you have one for the pool, you have one for the paving. Straight line, very, very simple. In straight line, you can only use those reserves for the intended purpose for which they were collected unless you get owner permission to do otherwise, potentially. The other funding option is pooled. What pooled means is you put all the required reserve monies into one account and then you can use those funds for any reserve item for which that funding is pooled. So, if you have for instance, say, pooled reserve account, and again, I'm not talking specifically SIRS or not SIRS, I'm talking just generally reserves.

If you have a pooled reserve account that has, for instance, you're paving the pool and maybe the gate in it, you can use those funds for any one of those three items. Because the statute presumes you're going to straight line though, you cannot have pooled funding unless you get approval of the membership to fund your reserves in a pooled manner. So, one of the questions we've been getting a lot of is now that we as an association have to have SIRS, can we pull the SIRS reserve funds? The statute is silent on that, but it does not say you can't and the DBPR has taken the position that it is permissible. So, we are telling clients you can pull your SIRS reserve funds, but you're going to have to get that owner vote potentially depending on the circumstances.

That's a question for your legal counsel. So, be aware of that issue, but also be aware that there are those options for the associations that prefer to have pooled rather than straight line reserves. So, I am going to now turn this over to Jim Turffs regarding the waiving of reserve funding.

James "Jim" Turffs, Esq.:
Yeah, thanks, Cindy. So, the easiest explanation for what associations can still waive reserve funding is just to say those that aren't subject to SIRS inspection. If your association is three habitable stories and requires a SIRS study, then you're going to have to have mandatory reserves. So, Jon's already gone through that earlier on in this process, this presentation talking about who's subject to SIRS and who isn't. So, I'm not going to harp back down on that. Instead, I'm going to pivot a little bit and talk about how those non-mandatory SIRS associations can actually go about waiving reserve funding. So, it is still an option for two-story buildings, one-story buildings, things like that. They can conduct a member vote.

The member vote has to contain some very specific language in the proxy. It has to be in all caps. If you need that, let us know and we can provide that separately. But it takes a majority of the membership to vote to approve waiving reserve funds. Should you do that? Probably not. I mean in the long term, reserving for SIRS components, even if you're not a SIRS association, is probably going to save your membership money over time. You don't have to comply with the immediate reserve funding like mandatory SIRS associations do.
So, you have more time to spread out that pain, but keeping strong reserves is really key to avoiding massive sudden expenses and special assessments down the road. So, even if you are not subject to mandatory SIRS reserves, it's probably a good idea to plan on keeping at least some of them just to avoid those expenses down the road.

Jon Lemole, Esq.:
Is it fair to say that even if you have to do SIRS, I mean if you're reserving for things that are other than the items that fall within the SIRS reserves, would it be fair to say that those other reserves are still fair game? It may not be the best idea, but at least legally, statutorily, they're still fair game for reducing the funding of those non-SIRS reserves, right?

James "Jim" Turffs, Esq.:
Absolutely. So, everybody's all on the hot topic issue of SIRS reserves, but you're right, going away from that, there are still optional reserves, things like that, that are up to the discretion of the association whether to carry it all in the first place. That applies to associations with mandatory reserves under the SIRS. They can still have additional reserves that aren't strictly required by the statute. You still can reserve for other items. Again, planning ahead is just such a great idea. Reserving for these eventualities, it's a good idea and it gets you ahead of the curve. So, there are still optional categories even for mandatory service associations. That holds true as it was before this first statute was passed or not.

I mean, you can have optional reserves or not. Up to the association's planning and desires. So, to address the other question that we've been getting frequently, well, really to avoid it, the question is, "Can service associations still waive service funding for maybe 2024 or 2025?" At this point in the year, the deadlines required to try to waive 2025 service reserves are so close in time that we're not going to advise you either way. The only thing we can tell you is to contact your own association's general counsel if you're interested in trying to avoid funding your reserves through 2025 and see if you can still get that done in a reasonable way. You have notice requirements, meeting requirements. You have to be at a certain stage in your budgeting process. So, contact your counsel.

That's going to be a case-by-case thing. There's no universal answer at this time of this year that we can give. So, now we'll move on to developer reserve funding. The slide says it all. Before turning over of the control of an association from the developer to the membership, the unit owners, the developer-controlled association cannot itself, the developer cannot elect not to reserve for service. Too many negatives in that sentence. To put it the other way, the developer on its own must reserve for service. That said, they can call a member vote and the membership can still vote to discuss whether or not to waive reserve prior to turnover, but we don't really see that happening all that often.
Quite frankly, it wouldn't be a brilliant idea to do, given the mandatory service compliance and all that stuff. I wouldn't suggest that the membership vote to do that, but under the statute, that is still technically an option. Of course, after turnover, to the extent the developer still owns units and is a member of the association, they can vote their interests when it comes to waiver. Again, this also ties into non-service associations. The developer in that context still owns units and can still vote to waive optional reserves and things like that. But the gist is that as long as the developer is in control of the association, they do in fact have to fund those mandatory reserves.

Cindy Hill, Esq.:
Jim, I want to step in real quick. There's a couple of questions I've seen that I just want to make clear. For the associations that have to have the service reserves, that is a separate bucket, so to speak, than your non-mandatory reserves. They do need to be treated differently. So, your SIRS reserves are going to be for your roof and your structural components, need to be a very different bucket just to use a layman's term than your optional reserves that are not controlled under SIRS. I want to try to make that clear before we move forward.

James "Jim" Turffs, Esq.:
I agree.

Jon Lemole, Esq.:
So the other provision in the statute finally involved some revisions or changes to the fiduciary duties of officers, directors, and management. So, I think Jen's covering that.

Jennifer Hicks, Esq.:
I am. So, to make this quick, so we have a little bit of time left for questions at the end, as a practical matter, a fiduciary duty is a legal obligation to act in the best interest of another party. So, as board members and managers, you have a fiduciary duty to act in the best interest of the association, not yourselves. So, what that means for the milestone and SIRS inspections is if you fail as a board or an association, if you fail to obtain either one of those statutory required inspections on time, you've deemed to breach your fiduciary duty. That obviously outlines a whole lot of ongoing issues.

If you've missed your inspections, you've just opened essentially a can of worms of problems for yourself and your association. So, they did this or in the Glitch Bill changed it to make it very clear that the failure to obtain those inspections is going to be a significant issue. As Jon was saying earlier, the local building officials and the state do have your census, for lack of better word, so they know who needs to have these done.

Jon Lemole, Esq.:
All right. That's the end of the presentation. We're going to take a look at the chat and see if we can go through some questions. I've been monitoring the PowerPoint here. So, if my colleagues have been keeping up with the chat, which I have not, go jump in.

Cindy Hill, Esq.:
I think he's trying to get off mute. I'll go ahead and look at this question that says if HOA window replacement is moved from HOA to owners, meaning let's say that the association had the responsibility for the maintenance and replacement of the windows and they want to vote change it to the owners. Does that vote need to happen this year or next year? It puts in here also that the budget would be approved by this year. I'm just going to go ahead and say that's too specific of a question for us to answer generally. Legal counsel for this association needs to weigh on these specific options, but I can also say that there are some options.

The decision to maybe change the window maintenance, and this has been something that a number of our clients have looked into, to avoid that SIRS requirement to fully fund their replacement is a potential option. There is not necessarily any hard deadline for when you do it. It is just going to be a matter of balancing out the SIRS requirements along with that vote. So, again, we can't give specific advice, but if that's an option your association's interested in, I'd encourage you to get with your general counsel and pursue that option.

Alan Tannenbaum, Esq.:
Jon, I think there were some questions about replacing engineer to complete a study, association may be dissatisfied with it. Is there any issue with getting a subsequent report and using that as your study?

Jon Lemole, Esq.:
Well, I guess the issue there would be whether the original engineer has issued a report. I mean you'd have this inherent conflict. You've got one engineer saying there may be a problem and you got another engineer saying there may not be a problem or there isn't a problem. I don't know how the building official would respond to that and react to that. I guess we'll have to see when that happens. I'm not aware of that situation being presented at least so far. I think the bigger issue would be what kind of question does that raise or potential liability would that raise for the association? Because you've got one report that says you've got problems, you've got another report that says you don't.
Again, it comes down to the issue of, "Well, how do you choose between them and do unit owners have some concern about that and could they potentially bring an action against the association?" Because you legitimately have a licensed engineer saying, "There are these problems I found," and yet the association is not doing something about it. So, there's not an easy answer to that. Certainly, I don't think any of us are in a position to look at an engineering report necessarily and say from an engineering standpoint, this is wrong. I think if you were going to question an engineer, you'd have to question maybe whether he or she looked at the building at all.

Was there some process-related deficiency in what the engineer did that you could hang your hat on and say, "Well, this isn't a valid report because of some gap in the process that the engineer did"? So I guess at the end of the day, it's all based upon why you're challenging one engineer's report and seeking a different report. We had a question about, "What's the average cost of a phase one inspection?" I don't know the answer. I mean it really is going to depend upon the size and age of your building. I don't know what the averages are shaking out to be. Maybe Alan's come across some numbers on these, but I don't. Who is responsible to provide the local building official with the milestone inspection report?

I have seen engineers who are providing those directly. I think that some municipalities are in effect requiring the providers to provide them directly. Some municipalities may not be doing that yet, but I think at the end of the day, when that report is issued, you as the association need to ensure that the report goes to the building official that it needs to go to. So, if the engineer sends it, great. If the engineer doesn't send it, I think it would be incumbent upon the association to make sure that it's submitted. I think in the future, we'll get some guidance on that.

James "Jim" Turffs, Esq.:
I'll add a little bit to that because the statute differentiates between milestone inspections and SIRS in that regard. So, the statute for milestone inspection says that the association has the duty to transmit to the local building official. For SIRS, it requires that the engineer actually do that, and I think it has to do with the signing and sealing of the plans and transmitting them to make sure they're authentic and things like that. But again, at the end of the day, I think if the engineer fails to send the SIRS to the local building authority, the association might be the one getting in trouble for that. So, the association at least needs to monitor that and make sure that is accomplished.

So, jumping down a little bit, there's a question I saw that I certainly want to address before we go today, and that's this question about SIRS and reserves being two separate entities and how to collect them. We may have created some confusion there, and that might be partly my fault. So, I'll try to clear it up. So, for associations that have mandatory SIRS requirements and those are specifically identified in the statute, structural components, things like that, those SIRS components have to be maintained separately and they have to be funded in accordance with the SIRS report. Now, Jon brought up the issue of optional reserves or components that aren't included in the mandatory requirement there. Those need to be maintained separately.

Yes, if your association has elected to reserve for non-mandatory items, then yes, you need to collect for both and they need to be maintained separately or at least for the purposes of today, they need to be maintained separately. So, I hope that clears that up a little and that also does tie back into a following question, which was can SIRS reserves be pooled? The DBPR has published material that does in fact say SIRS reserves can be pooled. So, we're sticking with what they said and we'll say yes.

Cindy Hill, Esq.:
Just adding to that, Jim, because I do think, unfortunately, I might have created some confusion as well, the SIRS reserves can be pooled. The non-SIRS reserves can be pooled or you can do straight line on one or pooled on the other. The Condominium Act does not limit that. One of the examples I give for not a SIRS reserve is if you have friends have a reserve for the pooled furniture, that's the reserve that is not going to be part of your SIRS. It's going to be in that different bucket from your SIRS reserves. So, hopefully, our comments have helped with those issues.

Alan Tannenbaum, Esq.:
Cindy, there seems to be some confusion about meeting the SIRS requirement and meeting what was a pre-existing reserve requirement of the statute. How did they interrelate? Do you still need to have your regular reserve studies?

Cindy Hill, Esq.:
Yes. Well, yes, except now that certain components of what would've been regular reserve studies are now being moved to the SIRS. For instance, your roof, to the extent that associations had to be at least putting out to the owners that reserve funding for roofs was either going to be fully funded, waived, or reduced. You still have to fund for the roof. That's not changed, but that's going to now go into your structural component, your SIRS bucket.

So, I would say that really when an association gets its SIRS from its professional, that list of reserves is the one you have to treat differently. Anything that's really not in that report is going to be, let's call it, your discretionary traditional reserves, the ones that have been treated where the owners can still vote to waive or reduce funding on them.

Alan Tannenbaum, Esq.:
It's still a requirement for a periodic reserve study other separate from a SIRS study.

Cindy Hill, Esq.:
Jim, you want to jump in with that one or you want me to...

James "Jim" Turffs, Esq.:
I'm sorry. I was actually preparing to answer another one.

Cindy Hill, Esq.:
Okay, then I'll go ahead. The requirements for reserves that are not SIRS have not changed. So, I'll just give you that if that helps. To the extent you've been funding for the pool furniture, let's say, you can keep funding for the pool furniture in the manner in which you have been funding, but the roof is now being moved over to the SIRS. So, hopefully, looking at the reports will help differentiate that because we really can't give specific advice as to which association, what components they're going to have and not have for that. But I can say the ones that are not governed by SIRS, those requirements have not changed. That's still going to be what it has been.

So, I hope that helps because honestly, the legislature dumped a lot of this on associations in a very short timeframe to come together and be prepared for this as it's been discussed repeatedly. There's not enough necessarily professionals to do these reports. This really puts associations under strict timeframes to make decisions about whether they want to change, for instance, window maintenance. There's a lot of being pushed on associations all at once here. So, to the extent you're feeling some confusion, you really should not feel alone.

Alan Tannenbaum, Esq.:
All right. Well, we've hit noon hour. If there's no other questions that anyone wants to tackle, we're going to close our session for today. Obviously, the challenges remain for all condos, three stories and high, to meet the requirements. Hopefully, the legislature will issue some relief and clarification come this next session. Thank you everybody for attending. Managers, get your information to Michelle in order to get your credit for today.

Jon Lemole, Esq.:
Thank you, everyone.

Cindy Hill, Esq.:
Good luck, Michelle.

Michelle Colburn:
Thank you.