HOA and condo association loans in Florida

Florida rewrote its condominium rules after Champlain Towers South collapsed in Surfside in June 2021. Two months before it came down, the association had approved a $15 million assessment for repairs required by the county's 40-year recertification, and owners had already been told what their share would be: from $80,190 for a one-bedroom to $336,135 for the penthouse, payable upfront or spread over fifteen years.

The requirements below are the response to that. They are also the reason a board facing a number like that today has more routes open to it than those owners did.

A building that is three habitable stories or more in height, as determined by the Florida Building Code, and that is subject in whole or in part to the condominium or cooperative form of ownership, must have a milestone inspection.

The first is due by 31 December of the year the building reaches 30 years of age, based on the date the certificate of occupancy was issued, and every 10 years after that. Where local circumstances warrant it, including proximity to salt water, the local enforcement agency may require the inspection at 25 years instead.

The requirement does not reach a single-family, two-family, three-family or four-family dwelling with three or fewer habitable stories above ground.

A residential condominium association must have a structural integrity reserve study completed at least every 10 years after the condominium's creation, for each building on the condominium property that is three habitable stories or higher in height as determined by the Florida Building Code.

Where a structural integrity reserve study applies, its findings are not advisory. Reserves must be maintained for the items the study identifies and that your declaration makes the association responsible for, and the amount must be based on the study's own findings and recommendations. The one route to waiving them is a vote to terminate the condominium.

Reserves may be funded by regular assessments, special assessments, lines of credit, or loans. A special assessment, line of credit or loan used that way requires the approval of a majority vote of the total voting interests of the association.

An association that must have a structural integrity reserve study may also secure a line of credit or a loan to fund capital expenses required by a milestone inspection or by the study itself. Once that facility is in place, funding from it must be immediately available for the board to draw on for required repair, maintenance or replacement expenses, without further approval by the members.

That last point is what makes a facility useful against a deadline. A board that has to call a members meeting before every draw cannot move at the speed an inspection report asks for.

There is one way to slow reserve funding to pay for the work, and it is narrower than it sounds.

For a budget adopted on or before 31 December 2028, a board may temporarily pause or reduce reserve contributions in order to fund repairs the milestone inspection recommended. It takes the approval of a majority of the total voting interests, the association must have completed a milestone inspection within the previous two calendar years, and the pause may run for no more than two consecutive annual budgets.

Three kinds of association are excluded: those still controlled by a developer, those where owners other than the developer have held control for less than a year, and those controlled by bulk assignees or bulk buyers. An association that pauses must also have a structural integrity reserve study performed before contributions resume.

Read the date carefully, because it is the part most easily missed. This is not a permanent feature of Florida law. It applies to budgets adopted on or before 31 December 2028, and a board planning around it later than that will find it gone.

A separate pause applies if a local building official determines that the entire building is uninhabitable because of a natural emergency. The board may pause or reduce reserve funding until the official determines the building is habitable again, and reserve funds may be spent on making it so. That pause needs no owner vote, and contributions must resume immediately once the building is habitable.

A pause and a line of credit answer different questions. A pause frees up what the association is already contributing. A facility provides what it does not have. A board reading a milestone report usually needs to weigh both, and the arithmetic is rarely obvious from either one alone.

Florida's milestone inspection and structural integrity reserve study requirements do not apply to you. The milestone inspection reaches buildings in the condominium or cooperative form of ownership, and the reserve study requirement sits in the Condominium Act.

What Chapter 720 says about reserves is permissive. Your budget may include reserve accounts for capital expenditures and deferred maintenance the association is responsible for. Where reserves are established under the statute, how they are determined, maintained and waived follows the rules in that section.

So for a Florida HOA the question is not what the state requires of you. It is what your own declaration requires, and what a lender will ask to see. A lender will generally want a current reserve study whether or not Florida obliges you to hold one, and a board that can show a funding plan presents a stronger file than one that cannot.