November 15, 2024 • 38 mins
The aftermath of the Champlain Towers tragedy has led to a flurry of legislative responses, but are they hitting the mark? Was the Florida Legislature's response to the Champlain Towers tragedy misguided in terms of overlooking some key factors that led to that deadly collapse and placing some obligations on the parties least able to shoulder them? Join Take It To The Board host Donna DiMaggio Berger as she unpacks this complex, multi-layered issue affecting countless communities across the Sunshine State who are facing looming and costly deadlines for engineering inspections and reserve funding mandates. Together with her podcast producer, Claude Jennings Jr, they confront the issues that may be causing countless people to reconsider life in a Florida condominium. They delve into the historical context and regulatory challenges, revealing the profound economic and social impacts on individuals, especially seniors on fixed incomes that these new laws are already having.
Their conversation also addresses the difference between highly functional, functional and dysfunctional boards and why dysfunctional boards are more than just a nuisance—they're a liability. In this episode, they explore the financial strains and governance challenges that can lead to board dysfunction. With Donna's expertise, they offer insight into identifying red flags and the importance of expert professional advice. From engaging legislators to revising governing documents, this episode promises solutions to foster highly functional boards amidst the ongoing crisis. Tune in for expert advice, actionable strategies, and a path forward for those navigating the murky waters of Florida's condo crisis.
Conversation Highlights Include:
- 9 questions to confirm if you're serving on a dysfunctional board!
- The Media's role in the Condo Crisis
- Who is most responsible for a safe building?
BONUS: Future Predictions
Related Links:
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Hi everyone, I'm attorney Donna DiMaggio-Berger
and this is Take it to the Board, where we speak condo and HOA.
In today's episode of the Takeit to the Board podcast, we are
going to explore the escalatingcondominium crisis in Florida, a
complex, multi-layered issueaffecting countless communities
across the state.
As insurance premiums continueto soar, legislative changes
(00:25):
unfold and aging buildingsconfront new safety mandates,
condominium boards and residentsface unprecedented challenges.
I'm joined once again by mypodcast producer, Claude
Jennings Jr.
We are going to examine thehistorical roots of this crisis,
the regulatory frameworks atplay and the economic and social
impacts on both individualowners and associations.
(00:45):
We hope you join us as wediscuss these critical issues
and shed some light on what liesahead for Florida's condominium
landscape.
Hi, claude, how are you doing?
Speaker 2 (00:54):
Donna, I'm doing wonderful and, by the way, we
have great guests on the showbut these are my favorite shows
because you get to share yourexpertise and I really feel like
the listeners enjoy hearingyour thoughts and the things
that you know about this field,because you're one of the best
at it, and so I'm lookingforward to this episode.
Speaker 1 (01:14):
Oh well, that's very nice of you to say, although I
have to say my partner, kenDirector.
He's got the highest numbers ofdownloading for his episode on
committees.
And you know, I told him thatwas going to be a good episode
and he didn't believe me.
He's like committees and I'mlike, yeah, committees.
People need to need to knowwhat to do with them.
Speaker 2 (01:32):
Right, yeah.
Well, you can't be that farbehind.
You've got to.
You've got to be second orthird or something like that,
I'm not going to say Well, let'sjump into this.
The Florida condo crisis Somepeople may not be aware of it
outside of Florida, but therehave been a lot of articles
about the Florida condo crisisand I'm sure you're reading
those.
Just take us through some ofthat and what you think and what
(01:55):
you've been seeing and reading.
Speaker 1 (01:56):
Yeah, and I know we've got Claude a lot of people
who listen in other states.
But Florida, in this regard, isboth a cautionary tale and it's
also going to set the examplefor what to do in the aftermath
of a catastrophe.
So I did read the Palm BeachPost article.
That was I think it was October27th and it was a six-page
article.
It was called Condos in Crisiswhy Florida's New Condominium
(02:20):
Safety Inspection Law isCreating Havoc for Condos.
So not the most positive titlefor an article, but yeah.
I mean listen, there's been alot of articles out there right
now talking about the loomingdeadlines for thousands of older
Florida condominiums, and thosedeadlines are end of the year
deadlines for buildings that arethree stories or higher.
(02:41):
They're deadlines for themilestone inspections, which are
engineering inspections to goin and have an engineer look at
these older buildings and saywhether or not they detect any
structural weakness orstructural deficiencies.
And then there, of course, arethe new reserve funding mandates
by the end of the year forthese three-story or higher
buildings.
And it's not just three stories.
(03:01):
You also have to have a certainnumber of units within the
building to be impacted by thislegislation.
So, for the reserve fundingmandate.
It's setting aside money underwhat we call the Structural
Integrity Reserve Study, or SERS.
But listen, since these lawswere passed, there's only been,
I think, a handful of buildings,claude, that have actually been
(03:23):
evacuated due to safetyconcerns.
So that's the good news Not thegood news for those few
buildings, but it hasn't beenmass evacuations.
But the bigger issue is how arepeople going to pay for this?
So you've got seniors living onfixed incomes and they're
starting to wake up to thereality that they may not be
able to afford to live wherethey're currently living.
(03:44):
Now, maybe they were livingthere all these years because,
as a membership body, they werevoting year after year to not
fund reserves.
They had that right underFlorida law and perhaps they
were also not prioritizingmaintenance and repair projects.
So those folks are starting torealize you know what the board
(04:05):
has to pass budgets that aregoing to pay for these things,
which means what the assessmentsare going to go up and for some
folks, they are not going to beable to continue living there.
By the way, other people who arebeing impacted are younger
purchasers who may be looking.
Who once upon a time would lookat these older buildings.
Maybe the property values wereright.
(04:25):
But now they're looking at itand they're saying is this too
much of a financial risk to buyinto an older building,
particularly one clod that'salong the coastline?
I think purchasers are gettingmore sophisticated about what to
ask for, and now the lawrequires them to be given a copy
of the structural integrityreserve study so they can look
and see how healthy financiallythe community is, if they've got
(04:49):
money in reserves to pay forthings like roof replacement,
painting and waterproofing,concrete restoration.
So for those younger families,they may no longer be looking to
buy in some of these olderbuildings because they're just
realizing that it may be toocostly down the road to continue
to upkeep older buildings.
And then, lastly, you've gotinvestor owners who are impacted
(05:12):
by these changes.
These are folks who have boughtdown here and in Florida.
Sometimes it's second homes, sothere's vacation homes.
A lot of the times, though,it's people who have purchased
these condo units in Florida andthey rent them out.
And for those folks.
They're not so happy abouthaving to spend a lot of money
to maintain the buildings,because that cuts into their
(05:35):
return on investment.
So they're impacted as well.
Speaker 2 (05:37):
Yeah Well, and you hit the nail on the head as far
as with maintenance costs and alot of people have to leave
because they can't afford tomaintain them.
But that might be news to somebut not news to some experts.
A lot of these articles,they're saying that the experts
are saying that this is anoverdue reckoning for some of
these people, Like, did you seethis coming from afar off?
(05:58):
And did others see it?
And how come things weren'tdone earlier to try to fix it?
Speaker 1 (06:03):
I'm going to tell you I have read those articles with
the experts are like well, yougot what was coming to you.
You know you can almost seethem wagging their finger in the
air and to a certain extentthey're right.
There should have been, thereshould have been more attention
paid to both the budget, thereserves, and to the to the
maintenance issues both thebudget, the reserves, and to the
(06:27):
maintenance issues.
Look as humans do some of usengage in short-term thinking as
opposed to long-term strategicthinking.
I think the answer is yes.
Speaker 2 (06:32):
I feel like my whole life is based on short-term
thinking and I've got tostrategize better for the new
year.
But anyway, we'll talk aboutthat later.
Speaker 1 (06:38):
I mean, look for some of these people.
I don't think they thought theywere going to live this long,
so you know that's another thing.
We used to call them the greenbanana crowd, where they
wouldn't buy green bananasbecause they weren't sure they
were going to be around to seethem ripen.
I hate to say that, but therewas a certain mentality.
And also I think, claude, thatwhen people were purchasing
decades ago in Florida, theywere sort of given the
(07:00):
impression I don't know who gaveit to them, I don't know if it
was their friends and neighbors,or it was realtors at some time
, or the developers, but it wasa turnkey proposition, right, I
don't have the same issues ofmaintaining a single family home
.
I'm going to go buy that condounit and I only have to worry
about my white box, the fourwalls, right, I just turn the
(07:22):
key and that's it.
It's like a hotel room.
Well, it's not.
You own your unit, but you alsoown a prorated share of the
common elements, which is thebuilding exterior, the roof, the
pool, all the recreationalamenities.
So for those who say this is along overdue reckoning, I can
certainly understand that.
But I also I'm empathetic tothe people who perhaps, whether
(07:44):
knowingly or unknowingly, didn'tsee this coming.
And look, there's another schoolof thought too, claude.
There are people who believethat these new laws are designed
to facilitate a land grab bydevelopers who you know thinking
that at some point these olderowners are just going to simply
give up and they're going tosell the land.
Because a lot of these oldercoastal buildings think about it
(08:06):
that's where would you buildthis great long coastline here
in Florida?
That's where buildings you'vehad buildings in existence for
40, 50, 60 years in Florida.
So they're in great locations.
So there are some people whothink part of this is
potentially a land grab.
So they sell and what's goingto happen?
Newer, more expensive buildingsare going to go up in their
(08:28):
place.
I think the truth is somewherein the middle.
I think the days of beinginformal when it comes to
operating your community areover.
There is certainly heightenedpotential personal liability for
people sitting on these boards.
I mean you have to think longand hard about it and you have
to make sure that you arefunctioning as a board and that
(08:49):
you understand what yourobligations are, because their
obligations are more intensethan they ever were before.
Speaker 2 (08:57):
Yeah, and you talk about that more than they ever
been before.
Let's go to the politics ofthings a little bit, and you and
I had a discussion of politicsbefore we started recording the
show.
We won't talk about that, itwas just us talking stuff.
But anyway, let's talk a littlebit about the Florida laws and
like consequences to them.
Were there a problem with theway some of these bills were
(09:18):
drafted that affect these condounits and I was kind of seeing
it come to fruition?
Speaker 1 (09:22):
Yeah, and that's a, by the way, it's a great
question.
Claude and I were talking weare the day after election here,
and so we are two days afterelection here it feels like a
day Could be election day.
Speaker 2 (09:35):
It's all running together.
It's a blur.
Speaker 1 (09:38):
It's a blur.
Well, you know what they sayabout laws it's like sausage.
You don't want to see the lawsbeing made.
But here's the thing.
Florida is a huge state.
We have 67 counties.
They are very differentcounties.
So before Champlain Towerscollapsed, there were only two
out of 67 counties in the stateof Florida that required
(09:58):
inspections for older buildings,and those were Miami-Dade and
Broward.
Actually, champlain Towers wassituated in one of two counties
that required older buildings tobe certified upon their 40th
birthday, and that's importantto understand.
So after the problem now we'vehad three we're going into four
(10:27):
legislative sessionspost-Champlain Towers tragedy.
Right, and remember, after theafter Champlain Towers collapsed
, the Florida legislature didnot pass any legislation
designed to address safetybuilding safety in older
buildings during the regularsession.
They were called back during aspecial session because people
(10:49):
were basically saying how couldyou go into session and not do
anything about this tragedy?
So they went back into specialsession.
They passed a bill that wasSenate Bill 4D, but they did
that in a very condensed specialsession.
So you can just imagine thatthere were going, it was
inevitable that there were goingto be unintended consequences
and things they hadn't thoughtabout.
(11:10):
And then, after that first billthere was a Senate Bill 154.
And then last session we hadwhat we call Condo 3.0.
There are still issues and Ithink some of the problem is
that the initial legislation wasbased on some misperceptions.
And I'm going to say it again,I think the media really
(11:32):
contributed.
I mean, our legislators readnews articles like everybody
else, and in the media's rush toassign guilt and try to get to
the bottom of a story, there's alot that they didn't cover.
So do you want to know what Ithink the misperceptions were?
Speaker 2 (11:48):
What's that?
Speaker 1 (11:49):
First of all, it was deferred maintenance leads to
tragedy.
Okay, they looked at a building.
It fell down and it wasterrible and 98 people lost
their lives.
And they said, well, that boarddidn't do its job.
It was deferring maintenance.
Okay, Deferred maintenance.
First of all, let's talk aboutthis.
It's not just about collapseand potential tragedy.
Deferred maintenance means thatwhen an association finally
(12:12):
gets around to completing thatrepair project, it's gonna cost
more and in the interim,property values in the community
could have gone down.
So deferred maintenance isalways a bad idea if for no
other reason that you're goingto spend more, the longer you
wait.
Typically and we certainly haveseen that over the last couple
of years with the inflation thatwe've experienced and also the
(12:34):
labor and supply issues thatwe've had.
In the case of Champlain Towers, one thing that the media never
reported on is that they wereconducting their 40-year
certification several yearsbefore the deadline.
So they were actually yearsahead of it.
That's not to say that therecouldn't have been deferred
maintenance throughout, likemost communities, different
repair jobs, but when it comesto the building certification
(12:57):
which is now what we have, thismilestone inspection, that
particular community wasactually conducting it years
ahead of time.
So that's the first thing, ifyou're only looking at deferred
maintenance as the problem, andthis is what contributed to the
collapse.
By the way, as we sit heretoday, they still have not
released what the official causeor causes were for that tragedy
(13:19):
.
Speaker 2 (13:19):
Oh, wow.
Speaker 1 (13:20):
Still don't know Years later, but we're going to
talk about that in a second.
The other issue was lack ofreserves leads to tragedy, so
lack of money.
So this is like you and I if wehad a household with no money
and we had to replace our roof,we're going to have a problem
doing it right, yeah, yeah,absolutely.
So it would be the same thingwith an association If they
(13:41):
don't have any money toundertake the necessary projects
, whether it's a roofreplacement, concrete
restoration, painting andwaterproofing, whatever it may
be.
Now they have to borrow money orthey have to pass special
assessments.
I'm going to go back toChamplain Towers again.
They had been funding reservesfor several years before the
(14:06):
collapse and they also hadfinancing in place.
So the two things that thelegislature was hanging their
hats on deferred maintenance andlack of reserve funding those
were not really contributingfactors.
They're not really contributingfactors.
Speaker 2 (14:14):
Wow.
So there are things that peopleare obviously missing.
You know, not deferredmaintenance or anything like
that.
There's got to be somethinglike location, different
conditions for differentlocations.
Something's missed.
So what are some of thosethings that's not considered by
the legislature when it comes todrafting some of these bills,
or even when we even talk aboutany of these inspections or
(14:36):
things like that?
Speaker 1 (14:37):
Well, here's where I think the Florida legislature
got it wrong.
First of all, they shifted allof the risk and the potential
liability onto the parties thatare least able to protect
themselves the consumers.
So think about all of the risk.
All of the potential liabilitywas shifted onto board members
and association members, thepeople living in these buildings
(15:00):
.
Here's what they didn't startout doing.
Safe buildings start with thepeople who build them right,
that's pretty obvious, right?
If your building's safe to startwith, it's going to give you a
leg up in terms of maintainingit down the road so safe.
I'm going to say it again safebuildings start with the people
who build them.
The thing that I think thelegislature did not take into
(15:23):
account and they should havetaken into account during that
first special session after thecollapse in June 2021, was
building standards.
More consumer protections wereneeded to pursue safety,
construction defectsparticularly.
And also, I want to say now, ifthey had done that, now that
(15:45):
we've got all of theseassociations spending millions
of dollars, claude, with repairprojects, what's to say that
some of the concrete restorationgoing on right now and the roof
replacement going on right nowand the electrical and plumbing
work going on right now is noteffective.
And these associations will needto pursue those contractors for
(16:05):
bad work.
In fact, the legislature wentthe other way.
So when you're talking aboutexercising your rights,
regardless of the jurisdiction,regardless of the state, there
is going to be something calledthe statute of limitations.
It's the length of time youhave to pursue your rights.
In Florida, the longest amountof time you have, it's called
the statute of repose used to be10 years, so it would be 10
(16:29):
years and you had that time tofigure out if there was a
construction defect in yourbuilding.
Okay, that was.
The Florida legislature reducedthat some years ago from 10
years to seven years.
Right around the time that theywere dabbling in all these
issues with the post-ChamplainTowers tragedy, they agreed to
(16:49):
further reduce the time periodthat owners had to assert their
rights against developers bystarting the clock earlier, and
in some cases for homeownersassociations, the clock would
have run out before the ownerscould even take control of the
association from the developer.
Speaker 2 (17:08):
OK, yeah, yeah To me it's madness.
Speaker 1 (17:11):
If you're talking about a tragedy tied to
residential construction, whywould you make it more difficult
?
For people to pursue theirrights?
Difficult for people to pursuetheir rights, and why would you
make it easier for developers orcontractors to say, well,
here's our risk.
And now our risk just got alittle bit less because the
(17:32):
Florida legislature has given usa nice gift and tied it up in a
bow.
So that's number one.
If I had been in thelegislature at that time, I
would have said folks, what arewe going to do?
Okay, you're right, we needinspections, Absolutely.
We need these volunteer boardsto hire licensed engineers or
licensed architects to go in.
(17:52):
They need to hire reservespecialists to tell them how
much money to set aside.
It's no longer good enough forBob or Sue on the board to come
up with these numbers out ofthin air.
But I also would have said whatare we doing to hold developers
accountable to make sure thatthe housing stock that's being
built in the state of Florida,in the Sunshine State, is safe?
(18:14):
Here's the other thing where Ithink the legislature got it
wrong.
Local government should be heldaccountable for its role in
building safety.
Speaker 2 (18:23):
Okay.
Speaker 1 (18:26):
Let me go back to Champlain Towers.
A local building official hadtold those folks at an open
membership meeting just weeksbefore the building collapsed
that the building was safe.
They'd been working with anengineer who was working with
the local building department.
How does that happen?
At the time the building wasbuilt, certain, there were
certain changes that had to besigned off on by the city and
(18:47):
the county.
Okay, at the time the building,there was new construction
going up next door to champlaintowers huge skyscraper.
There were changes made theretoo.
Those things were all approvedhow does?
Speaker 2 (18:59):
that happen yeah, yeah, yeah, yeah yeah.
Speaker 1 (19:02):
So right now, local government, all government,
enjoys the benefit of somethingcalled sovereign immunity, which
protects them, insulates themfrom a lot of liability if they
make mistakes.
And that makes sense, right?
We can't function as governmentif we don't have some
protection from our own mistakes.
Sure but for the real bigmistakes.
(19:23):
I think there should be moreaccountability for government.
Speaker 2 (19:26):
No, absolutely, and I like that.
Thought we should do newsegments.
You know where Donna thinksPhil on the Blank got it right,
where Donna thinks Phil on theBlank got it wrong.
I like that.
But let's talk about the boards.
You talk about accountability.
You know we don't want to paintwith a broad brush, but I
imagine that there are someboards that are better at
meeting these challenges thanother boards.
(19:46):
Have you seen any difference insome in your experience?
Speaker 1 (19:50):
Well, yeah, I mean when I'm reading these articles
about the condo crisis.
Claude, there are definitelycommunities that I work with
that they're not in crisis.
They're not in crisis at all.
They've stayed on top of theirmaintenance and repair projects.
They have consistently, youknow, funded their reserves.
They hold regular boardmeetings.
(20:10):
I've been out to those boardmeetings.
They're pleasant People seem.
The people who show up seem tobe happy.
There's no, you know, throwingof rocks.
There's no, you know, torchesand pitchforks.
So not everybody's in crisis interms of their operations.
However, I will say that justabout every Florida community is
(20:32):
in crisis when it comes toinsurance.
So it is very difficult to getreasonable insurance premiums in
Florida Condominiumassociations.
They fall into a commercialresidential category which does
not afford them the same levelof consumer protections that a
pure residential insurancepolicyholder would have.
(20:53):
So everybody's dealing with theinsurance crisis and I want to
take a step back.
Remember I told you in terms ofdrafting what I thought they
got wrong, and I mentionedbuilding standards.
They didn't take into account.
They didn't take into accountmore accountability for
insurance.
I mean more accountability forlocal government.
The other thing they didn'ttake into account was the
(21:14):
insurance crisis.
So you can't load up people withall these costs with very
specific deadlines, without alsoacknowledging how much their
budgets have increased over thelast five years when it comes to
insurance in the state ofFlorida, even though they were
tinkering with different changes.
I think that should have beenacknowledged.
(21:35):
And the other thing I do wantto take a step back on that they
didn't also take into accountthe old adage that location
counts, so these buildings arenot all deteriorating at the
same level.
They didn't also take intoaccount the old adage that
location counts, so thesebuildings are not all
deteriorating at the same level.
Okay, depending.
They used to have it where itwas proximity to the coastline,
(21:57):
and then they changed that.
The other thing they didn'ttake into account that there
would be a supply and demandissue.
For all you know, you got touse a licensed engineer or
architect, so that became anissue too.
And then, lastly, they didn'ttake into account credentials
for reserve specialists.
So our legislature's got somework to do.
But let me get back to what youtalked about.
There are great boards outthere that are still grappling
(22:20):
with the insurance crisis, butthose communities are not
suffering as much because theyhave a board in whom they have
confidence.
And there are certain hallmarksto good boards, highly
functional boards, and there'scertain hallmarks to the
completely dysfunctional board.
Speaker 2 (22:35):
Okay.
So let's do bad news.
Good news.
Let's do bad news first.
How do you know that?
Because I'm just thinking ofmyself, if I was on my hoa, you
know there's.
There's the obvious things, Ithink.
But like, what are some ofthose hallmarks of a
dysfunctional?
Speaker 1 (22:49):
we'll do dysfunctional first and then
we'll do highly functional okay,so let's play the game so you
know those like those quizzes,like if you answer more than one
of these or two of these, youmay have adhd or you know oh
sure, all the clickbait outthere.
Speaker 2 (23:05):
You've answered yes to three or more of these.
Then you have this, or thenthis is your your problem.
Yep, got it.
Speaker 1 (23:11):
Yeah, I don't know I never know how, I never know how
credible those are, but theyalways suck me in, for what
reason or not.
Okay, so I created a little.
If you answer yes to two ormore of these questions, you
very well might be on adysfunctional.
Answer yes to two or more ofthese questions, you very well
might be on a dysfunctionalboard.
Okay.
So, two or more Do you rarely,if ever have meetings, board
meetings.
(23:32):
Do the board meetings you holdrequire security or, in the
absence of security, result inscreams, profanity and
incivility.
Have you been unable to fill avacant board seat?
Do you have directors withundisclosed conflicts of
interest that you know of?
I mean, they haven't disclosedit to the board, but you kind of
know what's going on, right.
(23:53):
Have you been unable to adopt aboard member code of conduct?
Speaker 2 (23:58):
I'm sorry.
I'm sorry, donna, if I couldinterrupt right there For
someone who may think that theythink of a you know, conflict of
interest.
Would that include, like OK,well, there's a certain company
that has a landscaping contractbut it happens to be the brother
in law of someone who's on theboard?
Like, is that the kind of thingyou're talking about there with
the?
Speaker 1 (24:15):
Yeah, it is so that.
So the board member whosefamily member owns the landscape
company that is contractingwith the association in Florida.
There's very specific lawregarding the disclosure that
needs to be made on that and 75%of the board has to agree that
that's okay, because they'redoing business with the
association.
But the other kind of conflictof interest is a little bit
(24:38):
different.
Speaker 2 (24:38):
Let's say you're a realtor.
Speaker 1 (24:40):
This comes up all the time.
You're a realtor, you'reserving on the condo board.
You're not doing business with.
You're serving on the condoboard.
You're not doing business withthe association, but you have
listings in the building.
Is that a conflict of interest?
Speaker 2 (24:51):
Okay.
Speaker 1 (24:51):
What do you think?
What do you think Claude?
Speaker 2 (24:53):
I think yes, it is.
Speaker 1 (24:56):
I agree it is.
It doesn't mean that a realtorcannot sit on a condo board in a
building in which they all havelistings.
Speaker 2 (25:05):
They need to know.
They need to know, they need todisclose that information.
Speaker 1 (25:07):
They do need to know and they need to abstain from
voting on the approval of thepeople they're selling the units
to.
Speaker 2 (25:15):
That is clearly a conflict of interest.
Speaker 1 (25:17):
Yeah, yeah, yeah, yeah, yeah, okay, okay so if you
answered yes to that one, ifyou have one or more directors
with undisclosed conflict ofinterest.
have you been unable to adopt aboard member code of conduct?
You know that one.
I'm always surprised whenpeople resist it.
A board member code of conductis not meant to be punitive.
It's really meant to map out aframework, a reasonable
(25:37):
framework, Because a lot oftimes people get on these boards
.
I served on my own HOA board.
Nobody tells you what you'resupposed to do.
People get on these boards.
I served on my own HOA board.
Nobody tells you what you'resupposed to do.
You know there's things thatcome up, we're doing this or
we're doing that, but in termsof defining your role and in
terms of sitting down as a, as adeliberative body and and doing
some sort of onboarding, itrarely happens.
So I don't know why there's aresistance to adopting a board
(25:59):
member code of conduct.
It can be a simple one-pagecode of here's how you know,
like almost like a missionstatement, or it could be 12
pages if you really need it.
Here's a few other questions.
If you answer yes, you may beon a dysfunctional board.
Do you have one or moredirectors who violate the
covenants and rules?
Directors are meant to set theexample.
(26:20):
So if you and in Florida,listen, and I'm sure other
states there are things thatdisqualify people from serving
on the board, like beingdelinquent.
How could you possibly passjudgment on a neighbor for being
delinquent if you, as a boardmember, are delinquent yourself
or if you're violating theparking rules, the leasing rules
, whatever it may be?
Do you have one or moredirectors who are taking illegal
(26:42):
compensation kickbacks?
Speaker 2 (26:44):
in Florida.
Speaker 1 (26:45):
That's going to be a crime Now also in Florida.
The law does allow boardmembers to be compensated if the
bylaws so provide.
In all my years of doing this,I've only had I think it was two
associations where theyactually paid their directors
and it was authorized under thedocuments.
Do you have one or moredirectors who breach
confidential information?
(27:05):
That's a big, big example of adysfunctional board.
So you're on the board.
Some of you are going to be onthe losing a different vote,
which is really timely, becausewhat did we start out talking
about?
before we joined this, we justhad an election and I'm sure,
50% of the people are not happywith the result.
50% or more are happy with theresults.
(27:29):
You're on a board.
You're not always going to beon the winning end of a vote.
The question is, how do youhandle that?
Do you say, okay, I said mypiece, I voted the way I voted,
I lost.
This is the position theassociation's taking.
Or do you run around and gossipin the neighborhood and try to
(27:50):
defeat the measure that was justadopted by the board?
If you've got directors who arebreaching confidential
information, that's a pretty bigsign that you are on a
dysfunctional board.
And then, lastly, has yourboard been subject to a recall
or litigation more than once ina 24-month period?
Speaker 2 (28:08):
Okay, all right, all right.
There we go.
Now, before we get to whatmakes a board highly functional,
I want to ask you questions,donna, and if you say yes to two
out of these three questions,then that means you have a good
podcast.
Ok, number one is the numberone, so you got.
If you answer yes to any ofthese three, then you have a
good show.
Do you enjoy your show?
Speaker 1 (28:29):
I do enjoy my show.
Speaker 2 (28:31):
All right.
Speaker 1 (28:32):
Is that a bad thing?
Speaker 2 (28:33):
No, no, no you said yes.
Do you think your guests areinteresting?
Speaker 1 (28:37):
I always think my guests are interesting.
Speaker 2 (28:39):
All right, and do you receive feedback to your show?
Speaker 1 (28:42):
Not as much as I'd like.
I would love to have more ofour I mean, we do Like when we
post it, we do, but I would loveto hear more from our listeners
.
I get great, we get greatfeedback, claude, from our
guests.
You know I started this podcastbecause I was just curious
about so many different things.
It's funny I recently the lastepisode we did before taping
(29:04):
this well, actually two beforethis was Ben Friedman with the
windows.
And I'm thinking you knowwindows and every time I learn
so much about person and whatthey do.
And even when you dig into it,you get to know people what
their personal passions are aswell.
Speaker 2 (29:21):
Sure, absolutely.
Well, there you go.
So it sounds like you have agood podcast, then, because you
answered yes to at least one ofthe three questions.
All right, so how do we knowthat we are part of a board
that's highly functional?
Speaker 1 (29:33):
I mean, listen, a highly functional board is
obviously the goal, should bethe goal for every association,
right?
They have frequent meetings andthey enjoy the meetings, just
like you asked me if I enjoy mypodcast.
Speaker 2 (29:45):
I do.
Speaker 1 (29:45):
It's nice to get people on boards who actually
enjoy being with people.
Sometimes we get people onboards.
They don't really like peopleall that much, or they really
don't enjoy being in a meeting.
It's not their deal and that'sokay.
But if that's really not whatyou like to do, which is to be
(30:06):
sitting in front of at an openmeeting, sitting in front of
your neighbors and talking andsometimes giving bad news, then
maybe being on serving on thisboard of directors is not for
you so highly, especially nowwith having to increase budgets
and you know, really, withhaving to increase budgets and
tell people that this is what wehave to do and what we're going
(30:28):
to do.
So, they have frequent meetingsand the board members like the
meetings.
They're respectful People showup at the meetings.
They actually board memberslike the meetings.
They're respectful People showup at the meetings.
They actually like coming tothe meetings and you know what,
and it's a conversation.
It's a two-way conversation.
I have seen boards that servealcohol and food.
It's almost like a party.
(30:48):
I like that.
I don't think you should servetoo much alcohol, because I've
seen those meetings kind of gooff the rails.
Highly functional boards,associations and boards they
have multiple communicationchannels because not everybody
likes the same mode ofcommunication.
Right, they give a lot ofdifferent choices.
So they may have a newsletter,they have a website, they may
(31:09):
have a social media channel likeFacebook.
They just they have a lot ofdifferent communication channels
.
They also, the highlyfunctional communities, tend to
have a lot of social eventsthroughout the year.
That brings people together, sothat's always really helpful.
They also highly functioningboards.
They do engage, claude, inshort-term and long-term
(31:32):
strategic planning.
They're not just putting outfires from one year to the next
or one month to the next.
They actually have a plan andthey've worked with professional
advisors on that plan.
The other thing that reallyhighly functional boards do and
I'm surprised more don't do iscreate a good and welfare report
at the end of the year and theylet people know what they've
(31:54):
done.
You know, in regular for-profitcorporations the shareholders
get that good and welfare reportso they know what's gone on.
If you've got people that don'tlive year-round in your
community those investor ownersperhaps, or the second, you know
, the vacation home owners, evenpeople who do live there but
they're busy with their livesand their families do an end of
(32:31):
the year report and let themknow how many meetings did you
hold, how many projects did youundertake, how much money did
you collect if you had anydelinquencies, and where do you
go from here?
Also, how many classes did yourboard members attend?
People like to know.
A lot of times the boards aredoing all this and they're not
communicating.
Really highly functioningboards, claude.
Speaker 2 (32:38):
They know how to hire professional advisors and not
do it themselves and they knowhow to vet those people and
we've talked about this beforeon previous shows about, you
know, whether from lawyers orlike higher professionals who
know what they're doing.
Speaker 1 (32:47):
Bingo.
You know, even if you have thatretired architect on your board
, you've got the retiredattorney, you've got the retired
CPA.
If you're trying to wear allthose hats while also serving on
a board you are flying, You'reon that high wire without that
safety net.
So hire the professionaladvisors you need.
(33:08):
Don't do it solo.
That's what the highlyfunctioning boards do.
Speaker 2 (33:12):
So, OK, before we close the episode, let's talk
about predictions.
Okay, and so you know, thecondo crisis.
This whole episode has beenabout that.
How long do you think this willlast?
And what's next?
What's coming up, what's downthe pipe, what to do next?
Speaker 1 (33:28):
I can't say how long I think it's gonna last, but I
do think we can shorten thecrisis with a couple different
techniques.
One, I think it's crucial thatpeople living in Florida
condominiums reach out to theirlegislators and talk to them and
educate them about theirbudgets, about what they're
(33:49):
facing, about their demographics, and ask them what's going to
happen in the next session.
And also, I do think that someof these communities should make
plans to go up to Tallahasseeyou know we only have a 60-day
session in the state of Floridapart-time legislature, so maybe
folks need to go up there.
(34:09):
And they need to talk to ourpublic policymakers Because, as
we talked about earlier, a lotof this legislation was based on
some, some of it was based onmisperception, but a lot of it
was based on not having notthinking about all the other
factors that contribute thattruly contribute to building
safety.
So I would say that's going tobe a key.
The same thing with insurance.
(34:30):
They need your publicpolicymakers need to understand
what's going on with theinsurance crisis in Florida
Working with counsel on yourgoverning documents, because a
lot of times you've got oldlanguage in your governing
documents that are making itharder for you to seek out
affordable, reasonable insurance, because your governing
(34:52):
documents may be requiring acertain level of coverage.
So that's going to be veryimportant.
I think you're going to seecondo terminations in the state
of Florida.
I know I'm working on at leasta half a dozen right now where
my clients are being approachedby developers.
These are well-maintainedbuildings.
Actually, these are notdecrepit buildings, they are
(35:14):
well-maintained, but they are inreally prime locations and
those folks are doing the mathright now.
They're trying to figure outwhether or not it makes sense to
sell or whether they're goingto be able to continue to afford
the maintenance.
And you know, we don't knowwhat the weather is going to
bring either.
Right, sure, right, yeah,that's been more predictable.
Speaker 2 (35:32):
You know, we don't know what the weather is going
to bring either right Sure,right yeah, and that's been more
predictable, you know, latelythan you know unpredictable than
we've seen.
Speaker 1 (35:39):
Exactly Because a lot of the building safety also
hinges on how much batteringthese buildings are taking when
it comes to storm season, oursix month storm season each year
.
So, and again, I think theyalso need to reach out.
People are going to need toreach out to local government
officials and talk to them.
They may be able to get alittle bit more time from local
(36:02):
government if they're taking thesteps necessary, if they're
showing a good faith effort tocomply.
I think people want to bereasonable, people want to help,
and then, lastly, there arecounties that are earmarking
funds to help older people meettheir special assessments.
It really does all boil down toClaude, though.
You have to be informed.
You can't just be looking onsocial media and saying, well, I
(36:24):
think, we could do this and Iread this and I hear from a lot
of people.
They think they know how tointerpret the statutes.
They think they know how tointerpret what's being put out
there.
Hire the right professionals tohelp you.
Speaker 2 (36:37):
Yeah, and just one last question, if I can sneak
this in.
Sometimes it's like I think ofthe fire alarm that goes off in
the building and you'rewondering is this the fire alarm
or is there something reallygoing on?
On a scale of one to 10, withone being I don't worry too much
about it, and 10, like oh, it'sthreat level midnight, like how
bad is it?
Or how concerned should peoplebe with this kind of crisis?
Speaker 1 (36:58):
I think an eight and a half.
Speaker 2 (36:59):
Oh, wow.
Speaker 1 (37:01):
Yeah, it's pretty bad .
Speaker 2 (37:02):
Okay.
Speaker 1 (37:03):
It's pretty, but you can navigate it.
Here's the situation.
You can't get through thiscrisis Boards can't by not
taking the steps they need totake to comply with their
fiduciary duties.
So they're getting a lot ofpressure from members saying we
can't afford this.
But if you're sitting on thatcondo board in Florida, the
(37:23):
statute says you're going tobreach your fiduciary duty if
you don't meet certain deadlines.
So you do this board members atyour own risk and your own
peril.
I had a conversation the otherday with a potential new client
who was saying well, can we dothis or can we do that?
And I said have you amassed anyassets in your life?
This was a 70-year-old man.
I assume he's going to yourhouse a vehicle have you amassed
(37:44):
any assets?
Well, yes, if you're going tosit on that board, you better
make sure you're ready to takethe steps that you need to take
to comply with the law, and thatmeans that there very well
could be some people that needto sell and move.
And it's unfortunate, but that'sprobably what's going to happen
.
So I would say we're at aboutan eight and a half.
Speaker 2 (38:03):
Okay, right about an eight and a half.
Speaker 1 (38:05):
That's the kind of that's just me.
Well, that's just me.
Speaker 2 (38:08):
That's good.
And again, listen to theprofessional people, Listen to
the one who knows what they'retalking about and conduct
yourselves accordingly.
Donna, it's always great, youknow, hearing from you and you
know this.
I've said this before.
I do feel like having episodeswhere you lend your expertise is
really valuable to thelisteners, and so thank you so
(38:29):
much for your time and for youknow.
Handling this Florida condocrisis.
Speaker 1 (38:31):
Well, thank you, Klon .
I hope we helped some peopletoday.
Thank you for joining us today.
Don't forget to follow and rateus on your favorite podcast
platform or visittakeittotheboardcom for more
ways to connect.
Hi everyone, I'm attorney Donna DiMaggio-Berger
and this is Take it to the Board, where we speak condo and HOA.
In today's episode of the Takeit to the Board podcast, we are
going to explore the escalatingcondominium crisis in Florida, a
complex, multi-layered issueaffecting countless communities
across the state.
As insurance premiums continueto soar, legislative changes
(00:25):
unfold and aging buildingsconfront new safety mandates,
condominium boards and residentsface unprecedented challenges.
I'm joined once again by mypodcast producer, Claude
Jennings Jr.
We are going to examine thehistorical roots of this crisis,
the regulatory frameworks atplay and the economic and social
impacts on both individualowners and associations.
(00:45):
We hope you join us as wediscuss these critical issues
and shed some light on what liesahead for Florida's condominium
landscape.
Hi, claude, how are you doing?
Speaker 2 (00:54):
Donna, I'm doing wonderful and, by the way, we
have great guests on the showbut these are my favorite shows
because you get to share yourexpertise and I really feel like
the listeners enjoy hearingyour thoughts and the things
that you know about this field,because you're one of the best
at it, and so I'm lookingforward to this episode.
Speaker 1 (01:14):
Oh well, that's very nice of you to say, although I
have to say my partner, kenDirector.
He's got the highest numbers ofdownloading for his episode on
committees.
And you know, I told him thatwas going to be a good episode
and he didn't believe me.
He's like committees and I'mlike, yeah, committees.
People need to need to knowwhat to do with them.
Speaker 2 (01:32):
Right, yeah.
Well, you can't be that farbehind.
You've got to.
You've got to be second orthird or something like that,
I'm not going to say Well, let'sjump into this.
The Florida condo crisis Somepeople may not be aware of it
outside of Florida, but therehave been a lot of articles
about the Florida condo crisisand I'm sure you're reading
those.
Just take us through some ofthat and what you think and what
(01:55):
you've been seeing and reading.
Speaker 1 (01:56):
Yeah, and I know we've got Claude a lot of people
who listen in other states.
But Florida, in this regard, isboth a cautionary tale and it's
also going to set the examplefor what to do in the aftermath
of a catastrophe.
So I did read the Palm BeachPost article.
That was I think it was October27th and it was a six-page
article.
It was called Condos in Crisiswhy Florida's New Condominium
(02:20):
Safety Inspection Law isCreating Havoc for Condos.
So not the most positive titlefor an article, but yeah.
I mean listen, there's been alot of articles out there right
now talking about the loomingdeadlines for thousands of older
Florida condominiums, and thosedeadlines are end of the year
deadlines for buildings that arethree stories or higher.
(02:41):
They're deadlines for themilestone inspections, which are
engineering inspections to goin and have an engineer look at
these older buildings and saywhether or not they detect any
structural weakness orstructural deficiencies.
And then there, of course, arethe new reserve funding mandates
by the end of the year forthese three-story or higher
buildings.
And it's not just three stories.
(03:01):
You also have to have a certainnumber of units within the
building to be impacted by thislegislation.
So, for the reserve fundingmandate.
It's setting aside money underwhat we call the Structural
Integrity Reserve Study, or SERS.
But listen, since these lawswere passed, there's only been,
I think, a handful of buildings,claude, that have actually been
(03:23):
evacuated due to safetyconcerns.
So that's the good news Not thegood news for those few
buildings, but it hasn't beenmass evacuations.
But the bigger issue is how arepeople going to pay for this?
So you've got seniors living onfixed incomes and they're
starting to wake up to thereality that they may not be
able to afford to live wherethey're currently living.
(03:44):
Now, maybe they were livingthere all these years because,
as a membership body, they werevoting year after year to not
fund reserves.
They had that right underFlorida law and perhaps they
were also not prioritizingmaintenance and repair projects.
So those folks are starting torealize you know what the board
(04:05):
has to pass budgets that aregoing to pay for these things,
which means what the assessmentsare going to go up and for some
folks, they are not going to beable to continue living there.
By the way, other people who arebeing impacted are younger
purchasers who may be looking.
Who once upon a time would lookat these older buildings.
Maybe the property values wereright.
(04:25):
But now they're looking at itand they're saying is this too
much of a financial risk to buyinto an older building,
particularly one clod that'salong the coastline?
I think purchasers are gettingmore sophisticated about what to
ask for, and now the lawrequires them to be given a copy
of the structural integrityreserve study so they can look
and see how healthy financiallythe community is, if they've got
(04:49):
money in reserves to pay forthings like roof replacement,
painting and waterproofing,concrete restoration.
So for those younger families,they may no longer be looking to
buy in some of these olderbuildings because they're just
realizing that it may be toocostly down the road to continue
to upkeep older buildings.
And then, lastly, you've gotinvestor owners who are impacted
(05:12):
by these changes.
These are folks who have boughtdown here and in Florida.
Sometimes it's second homes, sothere's vacation homes.
A lot of the times, though,it's people who have purchased
these condo units in Florida andthey rent them out.
And for those folks.
They're not so happy abouthaving to spend a lot of money
to maintain the buildings,because that cuts into their
(05:35):
return on investment.
So they're impacted as well.
Speaker 2 (05:37):
Yeah Well, and you hit the nail on the head as far
as with maintenance costs and alot of people have to leave
because they can't afford tomaintain them.
But that might be news to somebut not news to some experts.
A lot of these articles,they're saying that the experts
are saying that this is anoverdue reckoning for some of
these people, Like, did you seethis coming from afar off?
(05:58):
And did others see it?
And how come things weren'tdone earlier to try to fix it?
Speaker 1 (06:03):
I'm going to tell you I have read those articles with
the experts are like well, yougot what was coming to you.
You know you can almost seethem wagging their finger in the
air and to a certain extentthey're right.
There should have been, thereshould have been more attention
paid to both the budget, thereserves, and to the to the
maintenance issues both thebudget, the reserves, and to the
(06:27):
maintenance issues.
Look as humans do some of usengage in short-term thinking as
opposed to long-term strategicthinking.
I think the answer is yes.
Speaker 2 (06:32):
I feel like my whole life is based on short-term
thinking and I've got tostrategize better for the new
year.
But anyway, we'll talk aboutthat later.
Speaker 1 (06:38):
I mean, look for some of these people.
I don't think they thought theywere going to live this long,
so you know that's another thing.
We used to call them the greenbanana crowd, where they
wouldn't buy green bananasbecause they weren't sure they
were going to be around to seethem ripen.
I hate to say that, but therewas a certain mentality.
And also I think, claude, thatwhen people were purchasing
decades ago in Florida, theywere sort of given the
(07:00):
impression I don't know who gaveit to them, I don't know if it
was their friends and neighbors,or it was realtors at some time
, or the developers, but it wasa turnkey proposition, right, I
don't have the same issues ofmaintaining a single family home
.
I'm going to go buy that condounit and I only have to worry
about my white box, the fourwalls, right, I just turn the
(07:22):
key and that's it.
It's like a hotel room.
Well, it's not.
You own your unit, but you alsoown a prorated share of the
common elements, which is thebuilding exterior, the roof, the
pool, all the recreationalamenities.
So for those who say this is along overdue reckoning, I can
certainly understand that.
But I also I'm empathetic tothe people who perhaps, whether
(07:44):
knowingly or unknowingly, didn'tsee this coming.
And look, there's another schoolof thought too, claude.
There are people who believethat these new laws are designed
to facilitate a land grab bydevelopers who you know thinking
that at some point these olderowners are just going to simply
give up and they're going tosell the land.
Because a lot of these oldercoastal buildings think about it
(08:06):
that's where would you buildthis great long coastline here
in Florida?
That's where buildings you'vehad buildings in existence for
40, 50, 60 years in Florida.
So they're in great locations.
So there are some people whothink part of this is
potentially a land grab.
So they sell and what's goingto happen?
Newer, more expensive buildingsare going to go up in their
(08:28):
place.
I think the truth is somewherein the middle.
I think the days of beinginformal when it comes to
operating your community areover.
There is certainly heightenedpotential personal liability for
people sitting on these boards.
I mean you have to think longand hard about it and you have
to make sure that you arefunctioning as a board and that
(08:49):
you understand what yourobligations are, because their
obligations are more intensethan they ever were before.
Speaker 2 (08:57):
Yeah, and you talk about that more than they ever
been before.
Let's go to the politics ofthings a little bit, and you and
I had a discussion of politicsbefore we started recording the
show.
We won't talk about that, itwas just us talking stuff.
But anyway, let's talk a littlebit about the Florida laws and
like consequences to them.
Were there a problem with theway some of these bills were
(09:18):
drafted that affect these condounits and I was kind of seeing
it come to fruition?
Speaker 1 (09:22):
Yeah, and that's a, by the way, it's a great
question.
Claude and I were talking weare the day after election here,
and so we are two days afterelection here it feels like a
day Could be election day.
Speaker 2 (09:35):
It's all running together.
It's a blur.
Speaker 1 (09:38):
It's a blur.
Well, you know what they sayabout laws it's like sausage.
You don't want to see the lawsbeing made.
But here's the thing.
Florida is a huge state.
We have 67 counties.
They are very differentcounties.
So before Champlain Towerscollapsed, there were only two
out of 67 counties in the stateof Florida that required
(09:58):
inspections for older buildings,and those were Miami-Dade and
Broward.
Actually, champlain Towers wassituated in one of two counties
that required older buildings tobe certified upon their 40th
birthday, and that's importantto understand.
So after the problem now we'vehad three we're going into four
(10:27):
legislative sessionspost-Champlain Towers tragedy.
Right, and remember, after theafter Champlain Towers collapsed
, the Florida legislature didnot pass any legislation
designed to address safetybuilding safety in older
buildings during the regularsession.
They were called back during aspecial session because people
(10:49):
were basically saying how couldyou go into session and not do
anything about this tragedy?
So they went back into specialsession.
They passed a bill that wasSenate Bill 4D, but they did
that in a very condensed specialsession.
So you can just imagine thatthere were going, it was
inevitable that there were goingto be unintended consequences
and things they hadn't thoughtabout.
(11:10):
And then, after that first billthere was a Senate Bill 154.
And then last session we hadwhat we call Condo 3.0.
There are still issues and Ithink some of the problem is
that the initial legislation wasbased on some misperceptions.
And I'm going to say it again,I think the media really
(11:32):
contributed.
I mean, our legislators readnews articles like everybody
else, and in the media's rush toassign guilt and try to get to
the bottom of a story, there's alot that they didn't cover.
So do you want to know what Ithink the misperceptions were?
Speaker 2 (11:48):
What's that?
Speaker 1 (11:49):
First of all, it was deferred maintenance leads to
tragedy.
Okay, they looked at a building.
It fell down and it wasterrible and 98 people lost
their lives.
And they said, well, that boarddidn't do its job.
It was deferring maintenance.
Okay, Deferred maintenance.
First of all, let's talk aboutthis.
It's not just about collapseand potential tragedy.
Deferred maintenance means thatwhen an association finally
(12:12):
gets around to completing thatrepair project, it's gonna cost
more and in the interim,property values in the community
could have gone down.
So deferred maintenance isalways a bad idea if for no
other reason that you're goingto spend more, the longer you
wait.
Typically and we certainly haveseen that over the last couple
of years with the inflation thatwe've experienced and also the
(12:34):
labor and supply issues thatwe've had.
In the case of Champlain Towers, one thing that the media never
reported on is that they wereconducting their 40-year
certification several yearsbefore the deadline.
So they were actually yearsahead of it.
That's not to say that therecouldn't have been deferred
maintenance throughout, likemost communities, different
repair jobs, but when it comesto the building certification
(12:57):
which is now what we have, thismilestone inspection, that
particular community wasactually conducting it years
ahead of time.
So that's the first thing, ifyou're only looking at deferred
maintenance as the problem, andthis is what contributed to the
collapse.
By the way, as we sit heretoday, they still have not
released what the official causeor causes were for that tragedy
(13:19):
.
Speaker 2 (13:19):
Oh, wow.
Speaker 1 (13:20):
Still don't know Years later, but we're going to
talk about that in a second.
The other issue was lack ofreserves leads to tragedy, so
lack of money.
So this is like you and I if wehad a household with no money
and we had to replace our roof,we're going to have a problem
doing it right, yeah, yeah,absolutely.
So it would be the same thingwith an association If they
(13:41):
don't have any money toundertake the necessary projects
, whether it's a roofreplacement, concrete
restoration, painting andwaterproofing, whatever it may
be.
Now they have to borrow money orthey have to pass special
assessments.
I'm going to go back toChamplain Towers again.
They had been funding reservesfor several years before the
(14:06):
collapse and they also hadfinancing in place.
So the two things that thelegislature was hanging their
hats on deferred maintenance andlack of reserve funding those
were not really contributingfactors.
They're not really contributingfactors.
Speaker 2 (14:14):
Wow.
So there are things that peopleare obviously missing.
You know, not deferredmaintenance or anything like
that.
There's got to be somethinglike location, different
conditions for differentlocations.
Something's missed.
So what are some of thosethings that's not considered by
the legislature when it comes todrafting some of these bills,
or even when we even talk aboutany of these inspections or
(14:36):
things like that?
Speaker 1 (14:37):
Well, here's where I think the Florida legislature
got it wrong.
First of all, they shifted allof the risk and the potential
liability onto the parties thatare least able to protect
themselves the consumers.
So think about all of the risk.
All of the potential liabilitywas shifted onto board members
and association members, thepeople living in these buildings
(15:00):
.
Here's what they didn't startout doing.
Safe buildings start with thepeople who build them right,
that's pretty obvious, right?
If your building's safe to startwith, it's going to give you a
leg up in terms of maintainingit down the road so safe.
I'm going to say it again safebuildings start with the people
who build them.
The thing that I think thelegislature did not take into
(15:23):
account and they should havetaken into account during that
first special session after thecollapse in June 2021, was
building standards.
More consumer protections wereneeded to pursue safety,
construction defectsparticularly.
And also, I want to say now, ifthey had done that, now that
(15:45):
we've got all of theseassociations spending millions
of dollars, claude, with repairprojects, what's to say that
some of the concrete restorationgoing on right now and the roof
replacement going on right nowand the electrical and plumbing
work going on right now is noteffective.
And these associations will needto pursue those contractors for
(16:05):
bad work.
In fact, the legislature wentthe other way.
So when you're talking aboutexercising your rights,
regardless of the jurisdiction,regardless of the state, there
is going to be something calledthe statute of limitations.
It's the length of time youhave to pursue your rights.
In Florida, the longest amountof time you have, it's called
the statute of repose used to be10 years, so it would be 10
(16:29):
years and you had that time tofigure out if there was a
construction defect in yourbuilding.
Okay, that was.
The Florida legislature reducedthat some years ago from 10
years to seven years.
Right around the time that theywere dabbling in all these
issues with the post-ChamplainTowers tragedy, they agreed to
(16:49):
further reduce the time periodthat owners had to assert their
rights against developers bystarting the clock earlier, and
in some cases for homeownersassociations, the clock would
have run out before the ownerscould even take control of the
association from the developer.
Speaker 2 (17:08):
OK, yeah, yeah To me it's madness.
Speaker 1 (17:11):
If you're talking about a tragedy tied to
residential construction, whywould you make it more difficult
?
For people to pursue theirrights?
Difficult for people to pursuetheir rights, and why would you
make it easier for developers orcontractors to say, well,
here's our risk.
And now our risk just got alittle bit less because the
(17:32):
Florida legislature has given usa nice gift and tied it up in a
bow.
So that's number one.
If I had been in thelegislature at that time, I
would have said folks, what arewe going to do?
Okay, you're right, we needinspections, Absolutely.
We need these volunteer boardsto hire licensed engineers or
licensed architects to go in.
(17:52):
They need to hire reservespecialists to tell them how
much money to set aside.
It's no longer good enough forBob or Sue on the board to come
up with these numbers out ofthin air.
But I also would have said whatare we doing to hold developers
accountable to make sure thatthe housing stock that's being
built in the state of Florida,in the Sunshine State, is safe?
(18:14):
Here's the other thing where Ithink the legislature got it
wrong.
Local government should be heldaccountable for its role in
building safety.
Speaker 2 (18:23):
Okay.
Speaker 1 (18:26):
Let me go back to Champlain Towers.
A local building official hadtold those folks at an open
membership meeting just weeksbefore the building collapsed
that the building was safe.
They'd been working with anengineer who was working with
the local building department.
How does that happen?
At the time the building wasbuilt, certain, there were
certain changes that had to besigned off on by the city and
(18:47):
the county.
Okay, at the time the building,there was new construction
going up next door to champlaintowers huge skyscraper.
There were changes made theretoo.
Those things were all approvedhow does?
Speaker 2 (18:59):
that happen yeah, yeah, yeah, yeah yeah.
Speaker 1 (19:02):
So right now, local government, all government,
enjoys the benefit of somethingcalled sovereign immunity, which
protects them, insulates themfrom a lot of liability if they
make mistakes.
And that makes sense, right?
We can't function as governmentif we don't have some
protection from our own mistakes.
Sure but for the real bigmistakes.
(19:23):
I think there should be moreaccountability for government.
Speaker 2 (19:26):
No, absolutely, and I like that.
Thought we should do newsegments.
You know where Donna thinksPhil on the Blank got it right,
where Donna thinks Phil on theBlank got it wrong.
I like that.
But let's talk about the boards.
You talk about accountability.
You know we don't want to paintwith a broad brush, but I
imagine that there are someboards that are better at
meeting these challenges thanother boards.
(19:46):
Have you seen any difference insome in your experience?
Speaker 1 (19:50):
Well, yeah, I mean when I'm reading these articles
about the condo crisis.
Claude, there are definitelycommunities that I work with
that they're not in crisis.
They're not in crisis at all.
They've stayed on top of theirmaintenance and repair projects.
They have consistently, youknow, funded their reserves.
They hold regular boardmeetings.
(20:10):
I've been out to those boardmeetings.
They're pleasant People seem.
The people who show up seem tobe happy.
There's no, you know, throwingof rocks.
There's no, you know, torchesand pitchforks.
So not everybody's in crisis interms of their operations.
However, I will say that justabout every Florida community is
(20:32):
in crisis when it comes toinsurance.
So it is very difficult to getreasonable insurance premiums in
Florida Condominiumassociations.
They fall into a commercialresidential category which does
not afford them the same levelof consumer protections that a
pure residential insurancepolicyholder would have.
(20:53):
So everybody's dealing with theinsurance crisis and I want to
take a step back.
Remember I told you in terms ofdrafting what I thought they
got wrong, and I mentionedbuilding standards.
They didn't take into account.
They didn't take into accountmore accountability for
insurance.
I mean more accountability forlocal government.
The other thing they didn'ttake into account was the
(21:14):
insurance crisis.
So you can't load up people withall these costs with very
specific deadlines, without alsoacknowledging how much their
budgets have increased over thelast five years when it comes to
insurance in the state ofFlorida, even though they were
tinkering with different changes.
I think that should have beenacknowledged.
(21:35):
And the other thing I do wantto take a step back on that they
didn't also take into accountthe old adage that location
counts, so these buildings arenot all deteriorating at the
same level.
They didn't also take intoaccount the old adage that
location counts, so thesebuildings are not all
deteriorating at the same level.
Okay, depending.
They used to have it where itwas proximity to the coastline,
(21:57):
and then they changed that.
The other thing they didn'ttake into account that there
would be a supply and demandissue.
For all you know, you got touse a licensed engineer or
architect, so that became anissue too.
And then, lastly, they didn'ttake into account credentials
for reserve specialists.
So our legislature's got somework to do.
But let me get back to what youtalked about.
There are great boards outthere that are still grappling
(22:20):
with the insurance crisis, butthose communities are not
suffering as much because theyhave a board in whom they have
confidence.
And there are certain hallmarksto good boards, highly
functional boards, and there'scertain hallmarks to the
completely dysfunctional board.
Speaker 2 (22:35):
Okay.
So let's do bad news.
Good news.
Let's do bad news first.
How do you know that?
Because I'm just thinking ofmyself, if I was on my hoa, you
know there's.
There's the obvious things, Ithink.
But like, what are some ofthose hallmarks of a
dysfunctional?
Speaker 1 (22:49):
we'll do dysfunctional first and then
we'll do highly functional okay,so let's play the game so you
know those like those quizzes,like if you answer more than one
of these or two of these, youmay have adhd or you know oh
sure, all the clickbait outthere.
Speaker 2 (23:05):
You've answered yes to three or more of these.
Then you have this, or thenthis is your your problem.
Yep, got it.
Speaker 1 (23:11):
Yeah, I don't know I never know how, I never know how
credible those are, but theyalways suck me in, for what
reason or not.
Okay, so I created a little.
If you answer yes to two ormore of these questions, you
very well might be on adysfunctional.
Answer yes to two or more ofthese questions, you very well
might be on a dysfunctionalboard.
Okay.
So, two or more Do you rarely,if ever have meetings, board
meetings.
(23:32):
Do the board meetings you holdrequire security or, in the
absence of security, result inscreams, profanity and
incivility.
Have you been unable to fill avacant board seat?
Do you have directors withundisclosed conflicts of
interest that you know of?
I mean, they haven't disclosedit to the board, but you kind of
know what's going on, right.
(23:53):
Have you been unable to adopt aboard member code of conduct?
Speaker 2 (23:58):
I'm sorry.
I'm sorry, donna, if I couldinterrupt right there For
someone who may think that theythink of a you know, conflict of
interest.
Would that include, like OK,well, there's a certain company
that has a landscaping contractbut it happens to be the brother
in law of someone who's on theboard?
Like, is that the kind of thingyou're talking about there with
the?
Speaker 1 (24:15):
Yeah, it is so that.
So the board member whosefamily member owns the landscape
company that is contractingwith the association in Florida.
There's very specific lawregarding the disclosure that
needs to be made on that and 75%of the board has to agree that
that's okay, because they'redoing business with the
association.
But the other kind of conflictof interest is a little bit
(24:38):
different.
Speaker 2 (24:38):
Let's say you're a realtor.
Speaker 1 (24:40):
This comes up all the time.
You're a realtor, you'reserving on the condo board.
You're not doing business with.
You're serving on the condoboard.
You're not doing business withthe association, but you have
listings in the building.
Is that a conflict of interest?
Speaker 2 (24:51):
Okay.
Speaker 1 (24:51):
What do you think?
What do you think Claude?
Speaker 2 (24:53):
I think yes, it is.
Speaker 1 (24:56):
I agree it is.
It doesn't mean that a realtorcannot sit on a condo board in a
building in which they all havelistings.
Speaker 2 (25:05):
They need to know.
They need to know, they need todisclose that information.
Speaker 1 (25:07):
They do need to know and they need to abstain from
voting on the approval of thepeople they're selling the units
to.
Speaker 2 (25:15):
That is clearly a conflict of interest.
Speaker 1 (25:17):
Yeah, yeah, yeah, yeah, yeah, okay, okay so if you
answered yes to that one, ifyou have one or more directors
with undisclosed conflict ofinterest.
have you been unable to adopt aboard member code of conduct?
You know that one.
I'm always surprised whenpeople resist it.
A board member code of conductis not meant to be punitive.
It's really meant to map out aframework, a reasonable
(25:37):
framework, Because a lot oftimes people get on these boards
.
I served on my own HOA board.
Nobody tells you what you'resupposed to do.
People get on these boards.
I served on my own HOA board.
Nobody tells you what you'resupposed to do.
You know there's things thatcome up, we're doing this or
we're doing that, but in termsof defining your role and in
terms of sitting down as a, as adeliberative body and and doing
some sort of onboarding, itrarely happens.
So I don't know why there's aresistance to adopting a board
(25:59):
member code of conduct.
It can be a simple one-pagecode of here's how you know,
like almost like a missionstatement, or it could be 12
pages if you really need it.
Here's a few other questions.
If you answer yes, you may beon a dysfunctional board.
Do you have one or moredirectors who violate the
covenants and rules?
Directors are meant to set theexample.
(26:20):
So if you and in Florida,listen, and I'm sure other
states there are things thatdisqualify people from serving
on the board, like beingdelinquent.
How could you possibly passjudgment on a neighbor for being
delinquent if you, as a boardmember, are delinquent yourself
or if you're violating theparking rules, the leasing rules
, whatever it may be?
Do you have one or moredirectors who are taking illegal
(26:42):
compensation kickbacks?
Speaker 2 (26:44):
in Florida.
Speaker 1 (26:45):
That's going to be a crime Now also in Florida.
The law does allow boardmembers to be compensated if the
bylaws so provide.
In all my years of doing this,I've only had I think it was two
associations where theyactually paid their directors
and it was authorized under thedocuments.
Do you have one or moredirectors who breach
confidential information?
(27:05):
That's a big, big example of adysfunctional board.
So you're on the board.
Some of you are going to be onthe losing a different vote,
which is really timely, becausewhat did we start out talking
about?
before we joined this, we justhad an election and I'm sure,
50% of the people are not happywith the result.
50% or more are happy with theresults.
(27:29):
You're on a board.
You're not always going to beon the winning end of a vote.
The question is, how do youhandle that?
Do you say, okay, I said mypiece, I voted the way I voted,
I lost.
This is the position theassociation's taking.
Or do you run around and gossipin the neighborhood and try to
(27:50):
defeat the measure that was justadopted by the board?
If you've got directors who arebreaching confidential
information, that's a pretty bigsign that you are on a
dysfunctional board.
And then, lastly, has yourboard been subject to a recall
or litigation more than once ina 24-month period?
Speaker 2 (28:08):
Okay, all right, all right.
There we go.
Now, before we get to whatmakes a board highly functional,
I want to ask you questions,donna, and if you say yes to two
out of these three questions,then that means you have a good
podcast.
Ok, number one is the numberone, so you got.
If you answer yes to any ofthese three, then you have a
good show.
Do you enjoy your show?
Speaker 1 (28:29):
I do enjoy my show.
Speaker 2 (28:31):
All right.
Speaker 1 (28:32):
Is that a bad thing?
Speaker 2 (28:33):
No, no, no you said yes.
Do you think your guests areinteresting?
Speaker 1 (28:37):
I always think my guests are interesting.
Speaker 2 (28:39):
All right, and do you receive feedback to your show?
Speaker 1 (28:42):
Not as much as I'd like.
I would love to have more ofour I mean, we do Like when we
post it, we do, but I would loveto hear more from our listeners
.
I get great, we get greatfeedback, claude, from our
guests.
You know I started this podcastbecause I was just curious
about so many different things.
It's funny I recently the lastepisode we did before taping
(29:04):
this well, actually two beforethis was Ben Friedman with the
windows.
And I'm thinking you knowwindows and every time I learn
so much about person and whatthey do.
And even when you dig into it,you get to know people what
their personal passions are aswell.
Speaker 2 (29:21):
Sure, absolutely.
Well, there you go.
So it sounds like you have agood podcast, then, because you
answered yes to at least one ofthe three questions.
All right, so how do we knowthat we are part of a board
that's highly functional?
Speaker 1 (29:33):
I mean, listen, a highly functional board is
obviously the goal, should bethe goal for every association,
right?
They have frequent meetings andthey enjoy the meetings, just
like you asked me if I enjoy mypodcast.
Speaker 2 (29:45):
I do.
Speaker 1 (29:45):
It's nice to get people on boards who actually
enjoy being with people.
Sometimes we get people onboards.
They don't really like peopleall that much, or they really
don't enjoy being in a meeting.
It's not their deal and that'sokay.
But if that's really not whatyou like to do, which is to be
(30:06):
sitting in front of at an openmeeting, sitting in front of
your neighbors and talking andsometimes giving bad news, then
maybe being on serving on thisboard of directors is not for
you so highly, especially nowwith having to increase budgets
and you know, really, withhaving to increase budgets and
tell people that this is what wehave to do and what we're going
(30:28):
to do.
So, they have frequent meetingsand the board members like the
meetings.
They're respectful People showup at the meetings.
They actually board memberslike the meetings.
They're respectful People showup at the meetings.
They actually like coming tothe meetings and you know what,
and it's a conversation.
It's a two-way conversation.
I have seen boards that servealcohol and food.
It's almost like a party.
(30:48):
I like that.
I don't think you should servetoo much alcohol, because I've
seen those meetings kind of gooff the rails.
Highly functional boards,associations and boards they
have multiple communicationchannels because not everybody
likes the same mode ofcommunication.
Right, they give a lot ofdifferent choices.
So they may have a newsletter,they have a website, they may
(31:09):
have a social media channel likeFacebook.
They just they have a lot ofdifferent communication channels
.
They also, the highlyfunctional communities, tend to
have a lot of social eventsthroughout the year.
That brings people together, sothat's always really helpful.
They also highly functioningboards.
They do engage, claude, inshort-term and long-term
(31:32):
strategic planning.
They're not just putting outfires from one year to the next
or one month to the next.
They actually have a plan andthey've worked with professional
advisors on that plan.
The other thing that reallyhighly functional boards do and
I'm surprised more don't do iscreate a good and welfare report
at the end of the year and theylet people know what they've
(31:54):
done.
You know, in regular for-profitcorporations the shareholders
get that good and welfare reportso they know what's gone on.
If you've got people that don'tlive year-round in your
community those investor ownersperhaps, or the second, you know
, the vacation home owners, evenpeople who do live there but
they're busy with their livesand their families do an end of
(32:31):
the year report and let themknow how many meetings did you
hold, how many projects did youundertake, how much money did
you collect if you had anydelinquencies, and where do you
go from here?
Also, how many classes did yourboard members attend?
People like to know.
A lot of times the boards aredoing all this and they're not
communicating.
Really highly functioningboards, claude.
Speaker 2 (32:38):
They know how to hire professional advisors and not
do it themselves and they knowhow to vet those people and
we've talked about this beforeon previous shows about, you
know, whether from lawyers orlike higher professionals who
know what they're doing.
Speaker 1 (32:47):
Bingo.
You know, even if you have thatretired architect on your board
, you've got the retiredattorney, you've got the retired
CPA.
If you're trying to wear allthose hats while also serving on
a board you are flying, You'reon that high wire without that
safety net.
So hire the professionaladvisors you need.
(33:08):
Don't do it solo.
That's what the highlyfunctioning boards do.
Speaker 2 (33:12):
So, OK, before we close the episode, let's talk
about predictions.
Okay, and so you know, thecondo crisis.
This whole episode has beenabout that.
How long do you think this willlast?
And what's next?
What's coming up, what's downthe pipe, what to do next?
Speaker 1 (33:28):
I can't say how long I think it's gonna last, but I
do think we can shorten thecrisis with a couple different
techniques.
One, I think it's crucial thatpeople living in Florida
condominiums reach out to theirlegislators and talk to them and
educate them about theirbudgets, about what they're
(33:49):
facing, about their demographics, and ask them what's going to
happen in the next session.
And also, I do think that someof these communities should make
plans to go up to Tallahasseeyou know we only have a 60-day
session in the state of Floridapart-time legislature, so maybe
folks need to go up there.
(34:09):
And they need to talk to ourpublic policymakers Because, as
we talked about earlier, a lotof this legislation was based on
some, some of it was based onmisperception, but a lot of it
was based on not having notthinking about all the other
factors that contribute thattruly contribute to building
safety.
So I would say that's going tobe a key.
The same thing with insurance.
(34:30):
They need your publicpolicymakers need to understand
what's going on with theinsurance crisis in Florida
Working with counsel on yourgoverning documents, because a
lot of times you've got oldlanguage in your governing
documents that are making itharder for you to seek out
affordable, reasonable insurance, because your governing
(34:52):
documents may be requiring acertain level of coverage.
So that's going to be veryimportant.
I think you're going to seecondo terminations in the state
of Florida.
I know I'm working on at leasta half a dozen right now where
my clients are being approachedby developers.
These are well-maintainedbuildings.
Actually, these are notdecrepit buildings, they are
(35:14):
well-maintained, but they are inreally prime locations and
those folks are doing the mathright now.
They're trying to figure outwhether or not it makes sense to
sell or whether they're goingto be able to continue to afford
the maintenance.
And you know, we don't knowwhat the weather is going to
bring either.
Right, sure, right, yeah,that's been more predictable.
Speaker 2 (35:32):
You know, we don't know what the weather is going
to bring either right Sure,right yeah, and that's been more
predictable, you know, latelythan you know unpredictable than
we've seen.
Speaker 1 (35:39):
Exactly Because a lot of the building safety also
hinges on how much batteringthese buildings are taking when
it comes to storm season, oursix month storm season each year
.
So, and again, I think theyalso need to reach out.
People are going to need toreach out to local government
officials and talk to them.
They may be able to get alittle bit more time from local
(36:02):
government if they're taking thesteps necessary, if they're
showing a good faith effort tocomply.
I think people want to bereasonable, people want to help,
and then, lastly, there arecounties that are earmarking
funds to help older people meettheir special assessments.
It really does all boil down toClaude, though.
You have to be informed.
You can't just be looking onsocial media and saying, well, I
(36:24):
think, we could do this and Iread this and I hear from a lot
of people.
They think they know how tointerpret the statutes.
They think they know how tointerpret what's being put out
there.
Hire the right professionals tohelp you.
Speaker 2 (36:37):
Yeah, and just one last question, if I can sneak
this in.
Sometimes it's like I think ofthe fire alarm that goes off in
the building and you'rewondering is this the fire alarm
or is there something reallygoing on?
On a scale of one to 10, withone being I don't worry too much
about it, and 10, like oh, it'sthreat level midnight, like how
bad is it?
Or how concerned should peoplebe with this kind of crisis?
Speaker 1 (36:58):
I think an eight and a half.
Speaker 2 (36:59):
Oh, wow.
Speaker 1 (37:01):
Yeah, it's pretty bad .
Speaker 2 (37:02):
Okay.
Speaker 1 (37:03):
It's pretty, but you can navigate it.
Here's the situation.
You can't get through thiscrisis Boards can't by not
taking the steps they need totake to comply with their
fiduciary duties.
So they're getting a lot ofpressure from members saying we
can't afford this.
But if you're sitting on thatcondo board in Florida, the
(37:23):
statute says you're going tobreach your fiduciary duty if
you don't meet certain deadlines.
So you do this board members atyour own risk and your own
peril.
I had a conversation the otherday with a potential new client
who was saying well, can we dothis or can we do that?
And I said have you amassed anyassets in your life?
This was a 70-year-old man.
I assume he's going to yourhouse a vehicle have you amassed
(37:44):
any assets?
Well, yes, if you're going tosit on that board, you better
make sure you're ready to takethe steps that you need to take
to comply with the law, and thatmeans that there very well
could be some people that needto sell and move.
And it's unfortunate, but that'sprobably what's going to happen
.
So I would say we're at aboutan eight and a half.
Speaker 2 (38:03):
Okay, right about an eight and a half.
Speaker 1 (38:05):
That's the kind of that's just me.
Well, that's just me.
Speaker 2 (38:08):
That's good.
And again, listen to theprofessional people, Listen to
the one who knows what they'retalking about and conduct
yourselves accordingly.
Donna, it's always great, youknow, hearing from you and you
know this.
I've said this before.
I do feel like having episodeswhere you lend your expertise is
really valuable to thelisteners, and so thank you so
(38:29):
much for your time and for youknow.
Handling this Florida condocrisis.
Speaker 1 (38:31):
Well, thank you, Klon .
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