By Attorney John C. Goede
Q: We have been reviewing our historical archives to determine the extent of engineering studies and reviews. We have diligently engaged engineers to perform reserve studies, but it appears we have no other professional studies. Is this sufficient for our Board to satisfy our fiduciary duty?
P.R., Stuart
A: In light of the tragedy on Surfside, many condominiums have performed a similar inquiry into their historical records and asked the same question. Unfortunately, this question cannot be answered with a simple yes or no. In a condominium reserve study, the association will engage a firm to review the existing condition of various assets, and then provide a recommendation on the remaining useful life of the asset, the replacement cost, and then provide a funding formula to fund reserves. In a condominium, absent authorization of the owners to partially fund or waive reserves, the Board must reserve to replace the roof, resurface the roads, repaint the building, and deferred maintenance or replacement expenditures exceeding $10,000.
This means that most condominiums will include most critical infrastructure, but that is not always the case. Many condominiums do not include waterproofing projects or concrete restoration in their reserve studies because it is not as obvious as a roof, paint, or windows. It is also possible that the reserve study was not performed by an engineer, and it is possible that the methodology to provide the study did not involve licensed contractors. As a result, because it is possible that a thorough and professional reserve study would provide the Board with a sufficient comfort level that the Board performed due diligence, it is not guaranteed.
The Board is charged with the responsibility to maintain, repair and replace the common elements and components dictated by the Declaration of Condominium. When the Board knows of a problem, or if there are observations that would lead a reasonable person to investigate, the Board is then charged with taking prudent and reasonable measures in response to a known dangerous condition. This is obviously different for every Board of Directors for every condominium in every part of Florida.
The short answer is that you if believe there is a problem, you should engage a licensed engineer to perform necessary testing and provide the Board with the right information to determine whether a response is required and, if so, the extent of any necessary response. Periodic reserve studies are helpful, but it is not necessary enough.
Q: Our collections policy has worked well for us over the years and we send warning letters before we send the account to the attorney for collections. With the new statute requiring an extra warning letter, do we need to add this to our written policy?
T.D., Treasure Coast
A: First, it is a helpful tool to have a written collections policy so there are clear and uniform efforts that apply to every delinquent account. It is important to know that the policy should be based on three sources of information: 1) requirements in the Florida Statutes; 2) requirements in your governing documents; and 3) your Board’s tolerance for delinquent accounts.
Your Board’s specific tolerance is a unique factor, but to answer this question you first need to know whether your governing documents self impose any requirements and how those requirements interact with the statute. For example, until just recently, the statute did not require the Association to send a warning letter before initiating collections, but many governing documents do include an obligation to provide a warning letter before engaging legal counsel or a debt collector for their services.
That has now changed and both Chapters 718 and 720 governing condominiums and homeowners associations, respectively, include a requirement to send a 30 day warning letter to delinquent owners before the account can be sent to an attorney whereby fees and costs can be placed on the delinquent owners’ account. The language of the letter is in the statute itself.
This means that you need to review your existing policy and accommodate this new requirement. Before, if you provided a single warning letter providing for 15 days, maybe you would consider replacing the 15 day letter with the statutory 30 day letter, or maybe you want supplement the 15 day letter with the statutory 30 day letter and therefore providing 45 days before the account is placed in collections.
Your specific policy is also contingent on your Board’s risk tolerance and budgetary safeguards. I would recommend you consult with your legal counsel to review your existing policy and craft a policy which complies with your documents and applicable Florida Statutes.