Four years ago, the tragic partial collapse of Champlain Towers South in Surfside, Fla., took 98 lives. The devastating event highlighted the critical need for proactive building maintenance, structural inspections, and financial preparedness to ensure condo safety.
Over the past few years, CAI has educated community association residents, board members, community managers, business partners, legislators, and regulators about structurally sound and fiscally responsible communities. Significant strides also have been made to ensure safety and financial stability.
Legislative updates
State legislatures have improved oversight and long-term planning for condominium communities. These changes signal a growing recognition that regular inspections, preventive maintenance, and funded reserves are essential to condominiums. Some notable policy changes are highlighted below.
California expanded reserve study requirements to ensure long-term financial planning and increased transparency regarding maintenance needs. Balcony inspections are now required.
Florida passed one of the most comprehensive structural integrity and reserve funding laws in the country. The law requires periodic milestone inspections of buildings and mandatory reserve funding for critical structural components. Recent amendments adjusted compliance deadlines but maintained strict oversight.
Hawaii strengthened reserve funding requirements reinforcing the importance of ensuring sufficient funds for major repairs and replacements.
Maryland passed a law mandating reserve studies and funding for certain condominiums with updates every five years.
New Jersey passed a law mandating reserve studies and funding and structural integrity inspections.
Tennessee passed mandatory reserve studies.
Virginia implemented legislation requiring reserve studies and funding plans to protect community financial stability.
Connecticut, Hawaii, Illinois, Massachusetts, New Jersey, and Rhode Island continue to consider condo safety legislation.
Policies, standards, and resources
In addition to legislative progress, CAI and the Foundation for Community Association Research have developed several new policies, standards, and resources.
Condominium Safety Public Policy Report: A member-led task force created a comprehensive report to guide state legislatures when navigating reserve studies and funding and structural integrity in community associations. The report has been updated multiple times to reflect and spotlight laws and accomplishments.
Reserve Study Standards: A dedicated group of reserve specialists, engineers, community managers, and more reviewed and updated the standards to incorporate maintenance and structural integrity. The CAI Board of Trustees subsequently adopted a public policy that aligns with the standards. The standards also were translated into Spanish.
Building inspection and structural integrity policy. The CAI Board of Trustees also adopted a policy that references façade inspections and standardizes definitions of terms related to maintenance.
Best Practices: Community Association Maintenance. The Foundation for Community Association Research published a report that highlights building maintenance programs, roles and responsibilities of developers and homeowners, how reserve studies and maintenance intersect, and sample maintenance checklists.
Reserve Studies and Funds: CAI Press published a new edition of the book that covers the theory behind reserve studies, how it fits in association budgets, funding plans, and more.
Dozens of articles and dozens of educational webinars also have been produced.
Through all these efforts, CAI encourages boards to communicate openly and educate homeowners about funding reserves, budgeting responsibly, and following professional recommendations for implementing best practices.
CAI remains committed to condo safety and honors the memory of the 98 people who lost their lives.
>>Find the latest information and resources covering aging infrastructure, reserve studies and funding, building inspections, maintenance, community association living responsibilities, CAI policy positions, and more on www.condosafety.com.
Dawn,
I appreciate this article and its intended goal as well as the CAI’s goal to make improvements in the maintenance and funding of community associations however, I wonder if the changes and or adjustments will have much of an impact.
Let’s start with the Reserve Study standards, many of the task force members are the same people that created the standards in the past. leaving components out with the stated reason that they have an extended useful life. When I began working in this field completing capital reserve studies in particular, I wondered about the practice of leaving out certain building and site components using their extended useful life as a reason. Was that not the issue with seaside, they didn’t have the funds to correct the problems. So, some of the same folks that created or left holes in the standards tried to correct what they did in the past? As I stated above many of the same people were involved creating the vague standards that basically did nothing to encourage the board at Seaside to do the right thing. Some of these people tell everyone they invented the reserve study and wrote the book on the process; well, I’m not impressed considering that the standards needed to be revised again. Did the construction field change that much in 2 or 3 years? Also, the new rule and the law in New Jersey are still not encouraging boards and many others to do better and many are still not there yet regarding funding, if they ever will be. During my time, of preparing reserve studies for the past 15 years, on average communities are much worse off financially now than when I first started.
I do believe the recent updates are better because they offer the flexibility to include components that should have been the case all along. So, it’s up to the preparer to include or not, (for the most part) so if the preparer is knowledgeable then its likely to be fine but some of these changes are really silly. for instance, they want to have the cost of performing a reserve study or update included in the component inventory. That is fine and easy enough to do added about 5k to cost no big deal but meanwhile some of these providers will underprice large components by many thousands of dollars making the cost of a reserve study a drop in the bucket. This will likely cause the community to have a large shortfall requiring funds at a critical time (when completing a replacement project).
Please see a letter I copied below I previously wrote regarding reserve funding and the new law in New Jersey.
Capital Reserve Funding and the New Law for Community Associations
Many associations are extremely underfunded. This situation is made worse by the huge inflation that occurred in the last 4+years and is ongoing. But instead of passing the costs on to the homeowners, some boards are looking to either artificially cut the unit costs used in their reserve studies or extend the remaining useful lives well beyond what is normal and customary or both. These requests used to be a rare occurrence, also many associations used to just give up and ignore the advice provided by the reserve study and throw it in a drawer and forget about it, carrying on with their underfunded reserves. Now they can no longer do that and be in compliance, so they are forced to confront the funding situation (as intended by the legislation), so instead of trying to make a workable plan and fund it as is necessary they are asking for unrealistic revisions like 30 years for pavement, 50 years for roof shingles and the like. Also asking to remove expensive critical components altogether (thinking it’s fantasy land).
Although this is not a new scenario, It will likely become much more prevalent going forward. I believe the reserve study preparer (RS) should have the ability to deny these unrealistic revisions and be required to sign off and if we do not, it’s not a viable reserve study. With this situation we are stuck between making the customer satisfied or probably very unsatisfied.
I have also encountered customers that are new to getting a reserve study, embrace the process, comply and appreciate the end results, but certainly not as many as I would like.
Regarding funding, there is no specific guidance for “adequate” It is my opinion, baseline funding that now everyone seems to know about is not adequate funding. The request to use Baseline Funding as an option is a method that somehow is being discussed. In past years this was never requested, asked about or considered but now for some reason it is being brought up as the savior to the underfunded communities and it appears like the managers and management companies are the enablers of this inadequate level of funding. The enablers of this poor choice are stating incorrectly that it’s shown as a viable option in the CAI Reserve Study Standards however its clearly stated in the standards that Baseline Funding is not recommended as a long-term solution it clearly states “Not recommended”
As mentioned above, we have to sign off on these reports, so someone needs to be the arbiter of what is acceptable (adequate) funding. Baseline funding is not adequate in my opinion due to the fact that the low balance year $0 Threshold will very likely occur in a year of a large project which provides no cushion for cost overruns and in turn makes it much more likely to have to borrow money or require added assessments to complete the project which runs counter to the purpose of the reserve study planning in the first place. As mentioned above in the Reserve Study Standards. The idea is to avoid the need for special assessments and loans. As I’ve stated in the past, any plan that requires or is likely to require special assessments or loans is not sound financial planning.
Including the cost to update the reserve study as one of the components is nice at around 5k but pales in comparison to reserve studies I’ve seen that include paving at very low unrealistic cost like $15 per SY that potentially underpriced that component by hundreds of thousands of dollars (but it’s a good thing we included the $5,000 reserve study) with the accompanying note stating it’s for a 2” overlay. $15 or $20 for a 2” overlay isn’t even close to what they are likely to spend. How does that work? Using an extremely underpriced component or components is another way to make it look like the community is adequately funded but it is not.
The end result of this is to state that there needs to be added standards. The vague standards that have been updated a few times still don’t get it done. The term “Adequate” is simply not a sufficient standard. The 5% -10% thresholds are not even standards, they are (I Think) something Falcon used as a guide and the idea sounded a little like the fed Fannie, Freddie requirements, so it resonated and became a quasi-standard which just happens to be a better standard than the term “Adequate”.
Certainly, baseline funding which was never recommended in the past is now somehow okay???? (according to the underfunded communities) And the only reason is because the perennially underfunded communities are now looking for another reason or excuse to not sufficiently fund their community’s capital reserve fund. This is the time to not provide these communities with an easier way out but pressure them to make better decisions.(isn’t that the reason they needed the law in the first place) I hear some state it is the right of these communities to be provided the baseline funding option which runs counter to entire purpose of the law to encourage communities to properly fund their capital reserve funds. We might as well remove as many of the high-cost components as they want and allow them to fund their fantasy reserve studies as they see fit.
Thanks