The Complexities of Condo Association Reserve Studies in Florida

By Jason Hambrecht 

With the recent passage of Senate Bill 4-D in Florida, condominium associations across the state are rushing to comply with the mandate of conducting reserve studies. As a company that has been providing condo association reserve studies as a service to clients for many years, CSI has witnessed firsthand the evolution and increasing complexity of these studies. This article delves into the intricacies and challenges associated with conducting reserve studies for condo associations in Florida.

The Developer’s Role In Condo Association Reserve Studies

Historically, reserve numbers are initially provided by the building developer to the condo association during the transition process. However, these numbers are often significantly underfunded, as developers tend to underestimate costs to keep initial condo assessments low and attract buyers. As a result, developer-provided reserve studies are typically inadequate and fail to accurately reflect the true long-term maintenance and replacement costs of the building components.

The Evolution of Reserve Studies 

Over the past two decades, reserve studies have become increasingly complex. In the past, even when condo associations took over the responsibility of conducting reserve studies, they were relatively simplistic, often featuring only a handful of line items for the most major building components. However, as time has progressed and new state mandates have been introduced, reserve studies have become much more detailed and nuanced.

The SIRS Report and Standard Reserve Study 

Under the current Florida law, certain items must be included in a Structural Integrity Reserve Study (SIRS) report. This study includes an evaluation of the current condition and estimated future needs for various structural components, such as roofing, load-bearing walls, primary structural members, foundations, fireproofing, plumbing, windows and doors, and electrical systems. It also extends to exterior painting and waterproofing, ensuring these components are well maintained to prevent structural deterioration. ​​​Condo associations are required to fully fund these items by December 31, 2024. However, this requirement complicates matters, as there are still reserve items associated with condos that are not part of the SIRS. To avoid the mandatory funding requirement, these additional items need to be calculated separately, essentially resulting in a second reserve study report, which CSI refers to as a Standard Reserve Study. The items in the Standard Reserve Study can be waived or partially funded if the owners vote to do so per Florida Statute Section 718.112, or per the Association’s documents. 

The Art of Reserve Studies

Reserve studies are more an art form than a precise science. If a condo association were to hire five different reserve study companies, it is highly likely that each report would yield different results. The accuracy of the report largely depends on the interpretation and assumptions made by the person completing it, leading to significant variations in the projected costs and timelines.

Component-Specific Challenges

  1. Roofs: Determining when a roof needs to be replaced is subjective and can vary greatly based on the opinions of different stakeholders. Some condo owners may prefer to replace a roof at the first signs of weakness, while others may choose to extend its life as long as possible.
  2. Pipes: Similar to roofs, the decision to replace pipes can be influenced by differing philosophies. Some condo owners may opt for replacement at a certain age to minimize the risk of leaks, while others may prefer spot repairs to extend the overall life of the pipes. Additionally, the option of lining the interior of pipes can further complicate the useful life and cost calculations.
  3. Exterior Wall Coatings: The frequency and quality of exterior wall coatings (waterproofing or paint) can vary significantly based on the preferences of the condo association. Some may prioritize aesthetics and require frequent recoating, while others may focus solely on protecting the underlying cladding and opt for longer intervals between recoating.
  4. Elevators: Elevators are a critical component in multi-story condo buildings, and their maintenance and replacement can be a significant expense. Some condo owners may prefer to modernize the elevators with new technology and aesthetics, while others may opt for a more cost-effective approach of maintaining the existing equipment as long as possible. Additionally, the decision to replace or upgrade elevators can be influenced by factors such as energy efficiency, compliance with updated safety regulations, and the availability of replacement parts for older models.
  5. Balconies: Balconies are exposed to the elements and can deteriorate over time, leading to safety concerns and the need for repairs or replacement. The extent and frequency of balcony maintenance can vary based on factors such as the materials used, the location and exposure to weather conditions, and the level of preventive maintenance performed. Some condo owners may prefer to address balcony issues proactively with regular inspections and repairs, while others may defer maintenance until more significant problems arise. The choice between spot repairs, partial replacements, or complete balcony reconstructions can also impact the cost and timeline of reserve fund expenditures.

Product Quality and Upgrades 

Most reserve study companies calculate replacement costs based on the assumption of replacing components with materials of the same quality (in-kind replacement). However, when a condo association actually undertakes a replacement project, they may choose to upgrade to higher-quality materials. Upgrades can significantly increase costs, rendering the original reserve calculations inaccurate. This applies to various components, such as roofs, wall coatings, balcony waterproofing, tiles, windows, and doors.

Time and Resource Intensive

Conducting a thorough and accurate reserve study requires a significant investment of time and resources. Each line item in the study demands careful consideration and analysis. For example, calculating pricing for waterproofing or roofing projects can take contractors weeks to assess, take measurements, and provide estimates. A reserve specialist multiplying this effort across all the components in a reserve study highlights the complexity and time-consuming nature of the process.

Unforeseen Conditions

Even with meticulous planning and analysis, reserve studies can be derailed by unforeseen conditions that arise during the actual project implementation. For instance, during a wall coating project, pressure washing may reveal previously hidden stucco cracks, necessitating extensive cladding repairs that exceed the original budget and timeline. Similarly, when replacing a roof, the discovery of old leaks and damaged roof trusses can require the involvement of a structural engineer, leading to additional costs and delays. These unforeseen conditions are not uncommon and can significantly impact the accuracy of reserve study projections.

Funding Strategies 

Once the reserve study is completed, condo associations must determine how to fund the projected expenses. There are various funding strategies available, such as increasing regular assessments, levying special assessments, reallocating funds from other budget items, or seeking bank loans or lines of credit. The choice of funding strategy can greatly impact the final reserve study report, as the calculations need to be adjusted accordingly.

Construction Solutions Inc Condo Association Reserve Studies

Conducting reserve studies for condo associations in Florida is a complex and challenging endeavor. The ever-changing legal requirements, diverse opinions of stakeholders, and the inherent uncertainties associated with long-term projections make it nearly impossible to produce a reserve study report with complete accuracy. Condo associations often find themselves dissatisfied with the results, as the findings can lead to increased financial obligations for owners.

Despite these challenges, reserve studies remain a critical tool for ensuring the long-term financial health and stability of condo associations. By proactively planning for future maintenance and replacement costs, associations can mitigate the risk of unexpected expenses and preserve the value of their properties.

The reserve study provider must work closely with condo associations to understand their unique needs, preferences, and financial constraints. Open communication and collaboration between the reserve study specialist, condo board members, and other stakeholders are key to developing a comprehensive and realistic reserve study report that serves the best interests of the community.


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