Experts say the collapsed Florida tower could have been fixed faster under the repealed law

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Surside, Florida – Late last year, after years of delays and controversies, the Champlain Towers South Condominium Association began a desperate search for $16.2 million to repair major structural damage that was slowly threatening the towering Surfside building – which may have contributed to the building’s partial collapse. On June 24.

The obvious place to look was the building’s reserve fund – the extra money raised to cover the cost of future repairs. But the account held only $777,000, according to apartment board documents — nowhere near enough to cushion the blow.

The collapse, which killed at least 54 people and left 86 missing, occurred before the apartment council could collect the necessary funds from residents and begin repairs. The cause of the collapse is unknown, and investigators, experts and advocates are trying to determine whether incomplete repairs played a role, whether the board saw the problem coming earlier — and whether a Florida law regulating ten-year scrapped apartment repairs could have been to make a difference.

One way to track needed repairs is a “back-up survey,” where apartment boards bring in experts like engineers or certified professionals every few years to inspect buildings and estimate how much the boards should collect from residents to prepare for future repairs. The building’s financial documents, obtained by NBC News and NBC Miami, show that Champlain Towers South has not conducted a professional reserve study since at least 2016. This decision was legal, but meant that planning was left to the board of directors, a changing group of volunteers with little training in building maintenance.

“If the owners had done a reserve study, and if the board had been proactive and had funded its reserves, that would never have happened,” said Giulio Rubina, a former state Republican lawmaker.

Rescue workers search among the rubble at the Champlain Towers South complex in Surfside, Florida, on June 26. Gerald Herbert / AP

Robaina sponsored a 2008 law requiring apartment unions to hire engineers or architects to report every five years on the cost of keeping up with repairs.

The law only lasted for two years before it was repealed in 2010, after Robina left office. Rubina blamed the opposition of real estate lawyers and property managers, who he said claimed the law was too burdensome for apartment owners. The legislator who sponsored the cancellation, former state Rep. Gary Obuchon, a Republican realtor and homebuilder, did not respond to messages seeking comment.

The revocation has left apartment residents in Florida less protected than those in nine states that legally require reserves studies, according to the Institute of Community Associations, a nonprofit that advocates for apartment associations. The nonprofit said thirty-one other states, including Florida, regulate the reserves in some way — although Florida is one of three states with loopholes that enable owners to opt out of the requirements. Ten states have no regulations on reserves at all.

“One of the steps that a building, and especially an older building, should take is to make sufficient funds available so that when you have to face significant cost challenges, there is an appropriate amount of money available,” said Gary Mars, an attorney from South Florida. Which represents the condo associations.

A survey conducted last year by the Community Associations Institute found that most homeowners’ associations are reluctant to raise residents’ fees, anticipate opposition, and thus fail to plan for long-term infrastructure repairs.

“In deferring inspections, reserves studies and – ultimately – full repairs or renovations, panels often end up facing a significantly more extensive and costly project in the long run,” the report said.

Maxwell Marcucci, a spokesman for the South Champlain Towers Consortium, declined to comment on the reserves studies. In an earlier statement to NBC News, he said the apartment council was doing everything possible to ensure the building’s safety. “They are not engineers and they are not safety experts,” Marcucci said. “They have hired credible experts and experts, and at no time have the experts indicated that there was an imminent danger of collapse.”

The lack of professional reserve study is a departure from what many experts say is best practice for condominiums, especially older ones on the coast—like Champlain Towers South, built in 1981—that have been exposed to decades of salt and water erosion.

Maintaining healthy reserves “is the single most important measure the joint board of directors needs to take,” said Robina, who co-owns a property management company.

Florida law requires apartment councils to keep reserves for repairs over $10,000, but it doesn’t specify exactly how much to set aside. This means apartment panels have some flexibility in avoiding savings on repairs that don’t need to be done right away.

Additionally, the law allows apartment buildings to waive reserve requirements entirely. Once its annual budget is passed, the apartment board can give residents the opportunity to opt out of reserve collection with a vote of the majority of unit owners. Apartment attorneys say sounds are common in Florida apartment buildings.

This is what Champlain Towers South appears to have done, lawyers and backup experts said.

Experts noted the council’s reliance on special assessments – additional fees on top of the regular monthly payments to residents – to fund needed repairs. The board imposed a $1 million special appraisal in 2016 for driveway renovations and a $350,000 special appraisal in 2019 for work on a generator, fuel pump, and fuel tank. Experts said such aggregate fees are indicative of a building whose owners decided not to set aside sufficient reserves through the regular monthly fee, opting instead to wait until a big ticket repair was required to demand residents pay for it. Many associations make this choice by repeatedly voting to waive or reduce the funding of their reserves.

“I can’t help but think the building has been doing this for years and years, which is why there wasn’t enough money available,” said Matthew Koesel, Southeast Regional Director for Reserve Advisors, which prepares the reserves studies. “Why would they do that? So they have lower fees. But in the long run, the fees are a small price to pay.”

The shortcomings of this approach began to become clear in 2018, when the council began inspecting the building prior to conducting a Miami-Dade County-commissioned inspection of buildings up to 40 years old. In an October 2018 report, architect Frank Morabito alerted the council to “significant structural damage” to the concrete slabs under the building’s pool deck and entrance. He blamed a “fatal error” in the building’s construction and years of erosion. He estimated the cost of repairs at $9 million.

After being shocked by the posters, the board invited a Surfside building official to a November 2018 meeting. The official told the board that the building was “in very good condition,” according to the meeting minutes. Some residents said this led them to believe the situation was not bad.

However, the council began trying to find a way to repair the damage – and pay for it.

Disputes over costs frustrated board members. Five members resigned over two weeks in the fall of 2019. The apartment association has had four presidents since 2018.

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By late last year, the council agreed there was no safe way forward without undertaking the massive reconstruction recommended by Morabito, along with repairs to the dilapidated roof. Morabito started the initial work and found that the damage detected in 2018 had gotten worse. The bill soared to over $16 million.

Board scramble for money. It found $707,000 left from previous private valuations and an additional $777,000 in reserves. But a quarter of the reserves were set aside for the insurance deduction, leaving $556,000. The board chose not to tap the reserves just in case another emergency occurs. That means the building was $15.5 million short, which the council voted in April to raise through a private appraisal. The cost for residents will be $80,000 to $360,000 per unit.

“A lot of this work could have been done or planned in years past. But that’s where we are now,” Chairman Jan Wodnecki wrote to residents before the vote.

By last month, the board had begun work on the roof, putting up other repairs for bidding. Responses were due to be received on July 7. Two weeks before the deadline, the building partially collapsed.

The remainder of the partially collapsed 12-story South Champlain Towers condominium is in a controlled demolition process on Sunday. Joe Riddell/Getty Images

The struggle the council faced nearly three years ago to start work on a concrete replacement project looms over the aftermath of the disaster. Investigators have not determined the cause of the failure. Deteriorating stents are among the possibilities.

Experts say the extent of the damage documented in the 2018 report raises questions about how the damage may have gone unnoticed before.

“I read the report, and I wondered how long the building looked like this,” said Robert Nordlund, founder and CEO of Association Reserves, a California-based reserve study company. “Did it look like that in 1998? 2008? Because there was clearly some significant deterioration in this 2018 report.”

Documents reviewed by NBC News and NBC Miami, including audits, budgets, financial statements, and board meeting minutes, do not indicate when the structural problems noted by Morabito began, although the board has pushed to replace leaking pipes in the building’s parking garage. In 2016. But documents show that the board did not conduct professional reserve studies and instead relied on board members to determine how much to set aside for reforms. In 2016, an accountant who conducted a year-end audit noted that “no independent study was conducted to determine the adequacy of current funding” and that “estimates of future replacement costs are based on estimates provided by the Budget Committee.”

The audits conducted by the same accountant in 2017, 2018, and 2019 included the same language. Last year, another accountant filed a similar disclaimer.

Mars, the attorney representing the condominium associations, said he believed the memo was “saying the CPA, ‘We don’t have any official documents to rely on.”

The accountants who conducted the audits did not respond to messages seeking comment.

Jeffrey Rimbaum, another attorney for condo associations, pointed to numbers in audits that showed that from 2016 to 2020, the board did not update the amount of money needed to replace porches and concrete. Each year, the council estimated it needed $320,000 to operate, even after the Morabito report found that more extensive and costly repairs were needed.

“We know the building has been fixed with millions of concrete in sight,” Rimbaum said. “So how did $320,000 come about for their current needs? If they had a reserve study and an engineer looked at what they had, they would have come up with a higher number. This indicates that the board wasn’t updating regularly he-she.”

He added: “This is an effect of the Florida Legislature that does not require a reserve study by qualified persons.”

More than a decade since repealing his short-lived law on reserve studies, Rubina said he hopes lawmakers will change course and re-enforce the mandate.

“This is a window of opportunity, and unfortunately it took a tragedy that could have been avoided,” he said.

John Shube reported from New York. Informed by Phil Brazan from Surfside, Florida

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