Florida Condos and HOAS: The Case for a Thorough Engineering Analysis Upon Turnover
I. THE CONTEXT
A. Repair and Maintenance: The Primary Association Responsibility
The primary responsibility of Florida condominium and homeowner associations is to maintain the common elements (in the case of condos), and association-owned property and the portions of multi-family buildings over which the association has repair and maintenance responsibility (in the case of homeowner associations). By statute, both condo and HOA boards owe a fiduciary duty to the owners. That fiduciary duty, of course, extends to making wise and prudent business decisions in carrying out the association’s repair and maintenance obligations.
B. Time Limitations for Potential Claims for Construction Defects
In Florida, the absolute outside date for pursuing claims for construction defects is ten years from certificate of occupancy or actual occupancy, whichever is later. However, claims must be pursued within four years of discovery. Further, for condos, statutory warranty periods extend for shorter time periods (primarily three years from certificate of occupancy for claims against contractors and material supplier and three years from certificate of occupancy or one year from turnover, whichever is later, for claims against the developer).
C. “Business Judgment Rule”
Courts will defer to the “business judgment” of condo and HOA boards in the means of undertaking repair and maintenance. In order for the “business judgment rule” to protect the board in undertaking the association’s repair and maintenance function, however, the repair and maintenance decisions must be reasonable and based upon adequate investigation.
II. THE CASE
Upon turnover, the repair and maintenance responsibility is thrust upon the newly-elected board, a board that will know relatively little about how the buildings and improvements were constructed. In the case of certain features, like retention ponds, there may be pending compliance actions being pursued by a regulatory authority. The board, with scant knowledge about the makeup of the buildings and improvements, and potential regulatory compliance issues, is in no position to make informed decisions on maintenance and repair, including adopting an adequate budget. This speaks to the need for the board to secure engineering studies to bolster its knowledge base so that informed decisions can be made concerning maintenance and repair.
So, what level of examination? Merely a visual examination provides but a hint of potential fundamental problems which may exist beneath the surface. Stucco cracking may be observed, but what is cause of the cracking? If applied to a wood frame, is the metal lath not nailed properly? Is the stucco too thin? Are there underlying framing problems which are driving the stucco cracking? A new paved surface may look fine, but is the base of adequate thickness? A few roof tiles may be displaced. Is this an anomaly, or does it point to a project wide attachment issue? Only through more invasive sampling can the true cause of a visible defect be ascertained. Furthermore, there may be hidden defects which early in a building’s life do not reveal themselves in any visible form.
Potential claims aside, a board, upon turnover, in order to carry out the association’s repair and maintenance responsibility in a responsible fashion, should secure a thorough engineering study of all buildings (within its repair and maintenance jurisdiction) and improvements. The incidental benefit of securing such studies is that the board, working with construction counsel, can consider recourse against the developer and other parties while applicable warranties and claims remain ripe. Whereas maintenance and repair is not optional for an association, pursuing claims is optional. But whether or not pursued, it would appear to be a prudent business decision to at a minimum have potential claims identified and analyzed while there is still time to pursue them.
This article by Alan E. Tannenbaum Esq. originally appeared in CAI South Gulf Coast quarterly Magazine, 2019.