Where were you on June 24, 2021, at 1:22 AM? Most residents in the beachfront luxury condominium at Surfside, Florida, were asleep in their beds when their twelve-story residential buildings shuddered, then collapsed, pancaking sleeping residents between the heavy concrete slabs of each floor. Senator Pizzo witnessed the scene when nearly a hundred residents died crushed in their beds that night, many more were injured.
Could this tragedy have been prevented? Florida statutes encouraged condominium associations to allocate a portion of the owners’ monthly maintenance fees to reserves, to pay for future critical structural repairs, and other critical components such as roofs, plumbing, and elevators.
Up to that time, the Florida Legislature had enabled members of condominium associations to vote to waive reserves, and unsurprisingly, most did just that. When owners ran for election to their condominium boards, they often promised loudly, NO FEE INCREASES!
Ironically, Miami-Dade County, where the Surfside tragedy occurred, likely had the most stringent laws in the country for inspecting aging condominiums for structural integrity. As a result of these county-mandated inspections, structural issues were discovered by the consulting engineers. Shortly before the tragedy, the Surfside board had approved a multi-million-dollar project to improve the building’s structural integrity. However, this was after a multi-year political struggle during which there was a mass resignation of board members. Many residents had balked at paying the massive special assessments to pay for the repairs, and the reserves were grossly inadequate.[1]
Could this disaster have been averted if reserves had been set aside years ago, and the structural repairs had begun years earlier?
FLORIDA LEGISLATURE RESPONDS TO THE TRAGEDY
The Florida Legislature quickly responded to the unfathomable tragedy of Surfside by passing legislation requiring that all condominium associations set aside full reserves by the end of 2025 for SIRS assets, which stands for Structural Integrity Reserve Assets, and requiring periodic 40-50 year inspections statewide, patterned after the law in Miami-Dade county. Non-SIRS assets roughly include assets that do not affect the structural integrity of the buildings, such as asphalt, air conditioners, and minor items such as pool furniture.
This issue has been spearheaded by the only State Senator who resides in a condominium, Senator Jason Pizzo. He has resisted intense political pressure to sweep this issue under the rug by delaying the implementation of these reserve requirements.
Since he is a Democrat, Senator Pizzo has teamed up with Republican Senator Jennifer Bradley to push forward these needed reforms. We must give kudos to Senator Bradley, she represents many rural counties in North Florida with very few condominiums. Yet she constantly makes public appearances with Senator Pizzo across Florida, especially condo-rich South Florida, to answer questions about condominium and HOA issues. She gains little political advantage from her cooperation. This is true bipartisanship in a highly partisan era.
The Legislature will be considering further changes to the reserve requirements in this 2025 Legislative Session. In the past few months, we attended two Legislative Round Tables concerning this legislation, hosted by Senators Pizzo and Bradley, at which we posed some thoughtful questions.
Much of the reporting on the issue of reserves has been cursory and melodramatic and has not dwelled on practical strategies to address this issue. We seek to offer an informed public discussion of these issues, providing practical guidance on how to comply with the current law as well as offering common sense suggestions for improvements, with feedback from our esteemed Senators.
Much of the discussion after Surfside, led by Senator Pizzo and Senator Bradley, focuses on making our condominiums safe so all owners can sleep soundly. Everyone agrees that safety is paramount for high-rise condominiums located near salt water. However, my association includes several dozen inland three-story condominium buildings, which means that the chance that our residents will be wakened by their building collapsing around them is near zero. Therefore, our primary concern is preventing water damage and mold by replacing the roofs and the plumbing. Many condominiums fall somewhere between these two extremes. Safety is important for everyone, so we wish to propose a phase-in of the reserve requirements if all safety issues have been resolved.
Unfortunately, to adequately discuss this issue, we need to get down into the weeds. But our reserve weed-whackers are on the ready. But after you read this article, perhaps like me, near year-end, when people are wishing you, Happy Holidays, you can counter with, Happy Reserves!
FIRE SPRINKLERS, CONDOMINIUMS, AND ELSS SYSTEMS
According to the fire regulations, for buildings where the floor of an occupied story is higher than seventy-five feet, which would be about five stories for most condominiums, various state provisions are due to come into effect regarding ELSS systems, which stands for Emergency Life Safety System, and includes fire sprinkler systems, fire alarms, smoke detectors, and structural compartments to keep fires from spreading.[2]
Senators Pizzo and Bradley, and a resounding majority of the owners in attendance at our roundtable, loudly concurred that ELSS systems were critical for safety reasons, but that the statutory requirements were vendor-driven and would result in unnecessarily astronomical assessments to implement, even for rich people. Senator Pizzo stated his desire to fight for relief from the current overly onerous requirements.
Senator Pizzo noted: “Having a wet sprinkler system will absolutely, conclusively, will first, protect life, because I don’t want you to ever have the experience I had standing over ninety-eight of my constituents in a pile of rubble, and secondly, will reduce your insurance premiums to justify this cost.”
This is a complex topic that deserves its own analysis. However, we must realize that an ELSS system is like insurance. The very definition of insurance is that it insures for events that probably won’t happen to you, but will happen to one out of a hundred people. A hundred people pay premiums, but only one insured files the big claim. The argument that ELSS systems are not needed because you probably will not experience a fire just does not make sense.
CASE STUDY OF A LOWER-INCOME CONDOMINIUM ASSOCIATION
During my working career, as a CPA I was an external auditor for many small and larger profit and non-profit organizations and attended professional CPE classes on condominium associations. Recently, I was appointed Treasurer of a condominium association with many lower-income owners. Perhaps ours is a good case history to explore the practical issues. The points I raise apply to all condominium associations, rich and poor.
In late February 2025, we attended a legislative update seminar hosted by Senators Pizzo and Bradley and posed several questions. Some of the questions got into the legal weeds of compliance and could not really be addressed adequately in an off-the-cuff public forum, so we also provided a preliminary copy of this article to both Senators and their staff for their consideration and input.
Our condominium association has thirty-two inland three-story buildings, far from the beaches with no salt-water intrusion issues. We don’t have as pronounced a problem with rusting and spalding rebar in the balconies and structural components. Shortly before my selection several years ago, the President wisely applied for nine million dollars of loans to replace the roofs, the plumbing, and make major renovations to our elevators, and other capital projects. Without these loans, we would be toast.
When we presented to our community the need to increase our reserves at our annual meeting, we always received many objections that raising the maintenance fees will cause our elderly owners to become homeless. Indeed, the rising fees have resulted in a record number of sales in 2024, although these increased sales were also due to the tripling and quadrupling of our property values. But if we don’t assess to increase our reserves to replace the roofs and the plumbing, our elderly owners are the most vulnerable if their units flood.
In 2007 my condominium maintenance fees were $200, they drifted up to about $300 in 2022. My fees jumped to about $400 in 2023, and then to about $450 in 2024, and then to about $500 in 2025. These increases covered normal inflation, plus our loan payments, plus insurance increases, plus our reserve contributions. Unfortunately, much of these increases were absorbed by rapidly increasing insurance premiums. Being a good accountant, I wanted the fees to jump a little bit more the past two years, but instead, we compromised by pledging to increase the reserve amounts by an average of $22 per unit per year starting in 2025, plus inflation for our budgeted operating expenses, which means we will likely be fully reserved for our SIRS assets, plus our essential non-SIRS assets, including elevators, in five to seven years. We feel this is reasonable, since we have replaced all our roofs and drainage plumbing, and have renovated most of our elevators. We have no safety issues revealed by our 40-50 Milestone Inspections, which were conducted by engineers examining the structural integrity of our buildings.
But what about the legislative mandate that our association’s SIRS asset reserves be fully funded by January 1, 2026? SIRS stands for Structural Integrity Reserve Assets, and SIRS assets include roofs, plumbing, walkways, painting, rebar, and other assets that directly affect the structural integrity of the building, or whose repairs would reveal structural deficiencies.
To fully fund our reserves for SIRS assets, we would need to increase the average per unit per month charge by another three hundred dollars! This our elderly lower-income owners cannot pay. Instead, to ease the financial burden, we plan to increase every year the average monthly assessment for reserves by about twenty-five dollars per unit per month until we are fully reserved for SIRS assets.
We consulted with our attorney on our plan, relying on Florida Statutes Section 718.112(2)(f)2a, which states that an association can implement “an alternative funding method which has been approved by the DBPR.”[3]
The dilemma is that the DBPR does not have the funding to actively enforce the condominium statutes, much of the enforcement actions are initiated by litigation and complaints. Our association does have an “alternative funding method plan,” but our fellow board members wanted to know: Should we contact the DBPR to approve our plan?
We contacted our trusted internal contact, Mr Phelps, about whom we could contact at DBPR to approve our alternative funding method. His response?[4] He said he really did not know of anyone we could call, nor was he aware of any such initiative within the DBPR. We consulted with our attorney on this question, and he replied that since we are making a good faith effort to comply with the statute in a reasonable period of time, and since most of our major SIRS assets have been recently replaced, that it would be better to ask for forgiveness rather than permission. The DBPR does not have the staffing to be proactive in regulating condominiums, rather they react to complaints and litigation.
Being a good accountant, I concur with Senator Pizzo that the state and DBPR must be firm with condominium associations, we concur that condominium associations must be encouraged to fully reserve for their SIRS assets.
MISCONCEPTIONS AND AMBIGUITIES SURROUNDING RESERVES
The most common misconception regarding reserve is that you need to immediately set aside the full replacement cost of SIRS assets in reserves. Senator Pizzo emphasized that you have to take the useful life of the assets into account when computing the reserves. For example, our oldest roofs will soon be five years old. Since roofs have a twenty-year SIRS life, in the fifth year of a million-dollar roof, you will need to set aside $250,000, which is 5/20th, or a quarter of the projected cost. This math is less cruel, but it is still cruel if you start collecting reserves from scratch.
Beware: the industry standard SIRS life for roofs is twenty years, while most insurance companies mandate that you replace your roof after fifteen years. When have our next SIRS review, which is required every ten years, we plan to review the demands of the insurance market and readjust their remaining life at that time for planning purposes.
Senator Pizzo also took credit for sponsoring a bill that became law in a prior session that enables associations to place their reserve funds in conservative investments. Even in a low-interest environment, the interest income on a million dollars or more is significant.
We started saving for reserves in 2023 and 2024, but we were not able to allocate as much as we desired for reserves since so much of the increase was eaten up by skyrocketing insurance premiums. As Governor DeSantis proclaimed, knock on wood, Mother Nature will be kind to Florida these next few years. Our insurance agent posits that the industry expects stable property insurance premiums in the immediate future.
Senators Pizzo and Bradley also shared some horror stories of condominium associations that have unnecessarily increased their assessments far too quickly. Some have mistakenly tried to reserve for the full replacement cost earlier than required by law. Others have assessed astronomical amounts to fully fund their reserves for SIRS assets, which are required, and for non-SIRS assets, which are not required. Associations can continue to waive reserves for non-SIRS assets indefinitely under the law, and IMHO, non-essential non-SIRS assets can be replaced as the budget permits.
Should elevators be reclassified as SIRS assets? This is somewhat moot, since other Florida statutes require their renovation. But being a good accountant, I think they should be classified as SIRS assets, and Senator Pizzo and Senator Bradley concur.
SHOULD THERE BE A PHASE-IN FOR REQUIRED RESERVES?
Senator Pizzo is absolutely correct when he observes: “I have yet to find people who are opposed to the idea of saving or investing or reserving. If you have kids, you didn’t wait until their senior year of high school before you started saving for their college, you put a little bit away each year.” “But here we are, fast forward, where there have been years of neglect for a number of associations who did not save properly.”
Adding to Senator Pizzo’s thoughts, when anyone complains to me about how the elderly on fixed incomes cannot afford the assessments required to bring us to full reserves, I remind them that they benefit from these increased assessments the most. After all, if we don’t fix the roofs and the plumbing, and their units floods as a result, this flooding could cause tens of thousands of dollars of mold and other damage. Would these elderly owners have the money to either pay to make the repairs themselves, or to hire attorneys to extract damages from the association?
Another unvoiced truth is that this mold problem is not limited to condominiums over two stories. There are rumors that there will be a bill filed to only require condominiums with five floors or more subject to the fully reserved requirements. IMHO, this would be totally irresponsible. Maybe in the future condominiums of any number of floors should be required to have reserves, for both safety and health reasons, and to prevent mold damage.
I remember little of the CPE course on condominium accounting from decades ago, but I do remember two salient lessons. First, property managers and association officers have an absolute duty to ensure that critical repairs are made, even when the board of directors and/or the membership do not want to address them. This should have happened at Surfside. Second, most associations will never vote for full reserves, and few will vote for partial reserves.
In a way, I am grateful for the painful lessons learned at Surfside. The tragedy at Surfside, for which Senator Pizzo was an eyewitness, made it politically possible for the Florida Legislature to require reserves for all condominiums. And Senators Pizzo and Bradley have persisted in their endeavor so condominium dwellers can sleep soundly and safely.
We are now accumulating reserves for the third year, and as an accountant, I am absolutely grateful for Senators Pizzo’s and Bradley’s efforts to stay the course on requiring reserves, and I am also grateful that I have to make a strong case for a bit of mercy on implementing reserves.
Senator Pizzo addressed my concerns: “Bruce, here is the reality. Is anyone going to come from DBPR to place you in handcuffs, telling the world that it is easier to ask for forgiveness? Will there be a receiver to take over your board and your building? Absolutely not. If somebody dies in your building, Bruce, it will be on you.”
The truth is, I do not live in an ocean-front high-rise condominium where safety is the primary concern. Our owners will not have their sleep interrupted by their-three-story condominiums collapsing on them in the middle of the night. We do not have the engineering problems inherent in dozen-floor buildings and the problem of saltwater intrusion rusting the steel rebar buried in the concrete pillars, where safety is the primary concern. In our three-story condominium, safety is important, but it is secondary. Our primary concern is safeguarding the health and wealth of our owners against water damage and mold.
Should the Legislature add a safe harbor provision in Florida Statutes Section 718.112(2)(f)2a? Perhaps it could be amended to say that an alternative funding plan to be fully reserved within seven years would be deemed reasonable, subject to the professional discretion of the DBPR. However, this safe harbor provision would only be available if there were concrete plans to replace safety-critical and health-critical SIRS assets with remaining lives of less than three years, which would include:
- Roofs,
- Plumbing,
- Fire Alarms,
- Other safety-critical SIRS Components,
- Plus needed structural repairs flagged by the 40-50 Year Milestone Inspections by engineers examining the structural integrity of the buildings, regardless of their remaining life.
Since this alternate plan would be subject to the judgment of the DBPR in this proposal, additional definitions would not be necessary.
During the Condo Roundtable, Senators Pizzo and Bradley indicated that they would be open to providing mercy when reserving for items such as roofs early in their life. How could this be done? My argument is that this is somewhat logically equivalent to my proposal.
Why somewhat logically equivalent? Back into the weeds we go.
Our association falls into this merciful category, we have very recently replaced all of our roofs. But also our reserve study recommends that in the next few years we will need to paint our buildings and resurface our walkways.
Why is painting a SIRS asset? Our reserve engineer indicated that although painting itself does not improve the structural integrity of our buildings, although it does act as a sealant, in the course of painting we will discover repairs that need to be made to the structure.
Quite likely the same logic applies to the walkways. Since we are an inland three-story condominium complex, this is not a safety issue for us. But, if we were a high-rise ocean-front condominium, then we might discover rusting and spalding rebar imbedded in the concrete when we remove the walkway surfacing, which is a serious safety issue.
When I appeared before the Regulated Industries committee meeting on March 25, 2025, the Senators and the DBPR Secretary expressed interest in this proposal. But even if this recommendation is not enacted, our legal counsel agreed that under current law, this approach is acceptable under the common-sense legal principle that if it is impossible to immediately comply with the law, you should do so in a reasonable period of time.
Senator Pizzo revealed a concluding truth at our Condo Roundtable: “At the end of the day, it is not Jason Pizzo and the Florida Senate changing some subsection of Chapter 718 that will dictate what you have to do.” He noted that even if the Legislature repealed all the condo legislation, the insurance companies will dictate what you have to do, or the bank that will finance the purchase of the units. “The market will dictate” what you have to do.[5]
SHOULD THERE BE ADDITIONAL REPORTING REQUIREMENTS?
Should there be additional reporting requirements for the engineers issuing the required reserve reports? The reserve report issued by a large national company for our association properly split out the SIRS and non-SIRS assets, but stated that our “fully reserved” contributions would enable us to have full reserves thirty years later, in 2053!!! Should these reserve reporting companies be required to comment on when the association would be in compliance with Florida statutes in funding their SIRS assets? Seven years is reasonable, thirty years is clearly unreasonable. Why not mandate by legislation that they include the safe harbor computations in their SIRS report?
Why does the new proposed language in Senate Bill 1247, line 930, state that a SIRS study should, at a minimum, contain projections where the reserve balance does not fall below zero?[6] Doesn’t this give permission for the reserve engineer to issue a SIRS report funding full reserves in thirty years?
CONCLUDING THOUGHTS
Surprisingly, although our reserve report listed the need to replace the drainage plumbing in our buildings, which has nearly been completed, it did not include the cost to replace the supply-side pressurized plumbing, which is starting to fail. When afterwards I asked the reserve engineer about this omission, he correctly stated that Florida law does not require reserves for assets with lives of thirty years or more. Should Florida law be interpreted as thirty years or more of remaining life rather than total life? Is legislation required for this?
This highlights another loophole: Why should assets with longer than a thirty-year life not be subject to reserves? Should plumbing be specifically included as a SIRS asset regardless of its useful life?
This also highlights a common misconception: That the reserve engineer is primarily responsible for the accuracy of the reserve report. That is categorically not true, the association property manager and condominium officers are always primarily responsible for the accuracy of the reserve report, since it belongs to them. Not only should they study the reserve report, they are also obligated to inform the engineer of all known deficiencies and planned repairs.
[1] https://en.wikipedia.org/wiki/Surfside_condominium_collapse
[2] https://www.premierfirefl.com/engineered-life-safety-systems-elss/
[3] http://www.leg.state.fl.us/statutes/index.cfm?App_mode=display_statute&URL=0700-0799/0718/0718.html
[4] https://www.youtube.com/watch?v=MA2KmJMKFrQ
[5] Condominium Roundtable at East Point Tower Condominiums, Main Speakers, Senator Jason Pizzo and Senator Jennifer Bradley, February 20, 2025
[6] https://www.flsenate.gov/Session/Bill/2025/1742/BillText/Filed/HTML retrieved 3/19/2025
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