‘Witch’s brew’ of swelling insurance costs and regulation compliance creates distress for Florida’s community associations
If an association doesn't initiate inspections, they could be liable for negligence or criminal charges.
Cost pressures are starting to be felt among community associations across Florida as rising insurance premiums and zoning code compliance costs hit their budgets, according to local attorneys.
Following the Champlain Towers collapse, Florida passed laws to avoid similar tragedies by tightening restrictions on building codes and forcing more thorough inspections. But those inspections are only supercharging the already rising cost of insurance premiums for some community associations, fueling more work for lawyers in the space.
“It’s putting a chilling effect on these associations from doing any investigations within the statute of limitations period to address any construction defects,” said Sarasota-based Salvatore Scro, special counsel at boutique firm Ball Janik.
Although these inspections can raise insurance premiums for associations if construction defects are found, Scro says those same insurance policies wouldn’t cover damages if there was a construction defect anyway.
And if an association doesn’t initiate inspections, they could be liable for negligence or criminal charges, said Kluger Kaplan shareholder Steve Silverman.
The increase in inspections may also create an uptick in litigation, not just over construction defects but also against the boards of these community associations, he said.
“Residents may say, ‘This board has been in place for X amount of years, and they haven’t done proper upkeep, they haven’t done appropriate inspections, they haven’t kept appropriate reserves. Now we’re being hit with these increased costs,’” Silverman said. “It is just a witch’s brew of all of these things that drive the premiums and drive the litigation, which in turn drives increased premiums again.”
The problems are even more pronounced on Florida’s shorelines, said Donna DiMaggio Berger, a shareholder in Becker & Poliakoff’s community association practice.
“Living in a multifamily building or a cooperative was marketed for decades as your affordable piece of paradise, right/? It’s not such an affordable piece of paradise anymore,” said Berger. “Based on what it takes to maintain these buildings and the new statutory requirements, only the very wealthy are going to be able to live in a coastal building.”
Berger and others in the space have noted a rising trend of these older buildings by the beach increasingly being bought out by developers with plans for high-end condos in their place.
The mounting list of factors adding to the already pricey cost of living in South Florida is one of the biggest concerns in the state as it pushes more people out, said Berger.
“If something doesn’t change, there will be hundreds of thousands of people losing their units or being forced to move, and frankly, I think Florida is no longer a hospitable environment for retirees,” she said.
As for solutions, there doesn’t seem to be any in sight, according to Berger and others.
“It’s shocking to me what’s been on our legislators’ to-do list, and they seem to have blinders on. Rather than culture wars, we need to be making sure that we don’t have a mass foreclosure crisis in this state like we had back in the recession,” she said.