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I WARNED ABOUT THE DANGERS OF INADEQUATE RESERVES By Eric Glazer, Esq.

I WARNED ABOUT THE DANGERS OF INADEQUATE RESERVES By Eric Glazer, Esq.

  • Posted: Jul 12, 2021
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I WARNED ABOUT THE DANGERS OF INADEQUATE RESERVES

By Eric Glazer, Esq.

In May of 2018, at about the same time the engineer was advising Champlain Towers South that their building need millions and millions of dollars in repairs, I wrote about the dangers facing condominiums all over the state because of the ability for owners to opt out of funding reserve accounts. I implored The Florida Legislature to get tough when it comes to reserves and make them at least partially mandatory. We know that as a result of the tragedy in Surfside, now The Florida Legislature will be forced to look long and hard for the first time at making condominium residents across our state put money away for major expensive repairs, or continue to allow many associations to ignore the necessary repairs and keep kicking the can down the road.

I can tell you right now that lobbyists who represent developers and contractors will try to prevent new laws requiring developers to fund reserve accounts before turnover, and even the residents after turnover. Why? Because it will make it harder to sell condominium units if reserves are mandatory. That means monthly assessments will be higher and units may not sell so quickly. They will make arguments like the government should be less intrusive into the lives of our Florida condominium residents and If the residents don’t want to fund reserves they know the risk. Right. And cigarettes don’t cause cancer.

Today, I’m simply going to reprint, verbatim, my blog written in May, 2018 below. Your thoughts are welcome.

 

SHOULD RESERVES BE MANDATORY?

 

I hate beating around the bush, so I want to get to the point. A financial crisis is coming and it’s going to be a big one. It’s also going to hit those that can least afford it. It’s going to result in massive amounts of foreclosures. It’s going to result in countless cases of elderly persons being displaced from their homes. The worst part is, it’s absolutely avoidable but I don’t believe any legislator would ever have the courage to float a bill to save the pending disaster.

 

My last 24 hours made it clear to me what’s on the way. I was at a meeting last night in a 55 and over condominium that is about 40 years old. Elderly unit owners were complaining that the pipes are getting old, there are occasional leaks, and they sometimes have to come out of pocket a few hundred bucks in order to clean up the mess in their unit and/or repair that broken pipe. They are complaining about bills for a few hundred bucks and find it difficult to pay them because their sole income is social security.

 

To state the obvious, there is no reserve account. There never will be. Generally, senior citizens don’t believe in reserving funds for repairs that may be necessary a decade or two from now because they believe they won’t be here anyway. So, year after year goes by, decade after decade goes by and there is never a reserve fund to fall back on should a major repair become necessary. As I write this column, the season’s first storm is forming in the Gulf, and it’s still May. We all know what just one storm can do to the community’s finances. Even if we are lucky to escape this year, next year and the next five years without a hurricane or tropical storm coming, there is another storm coming that is simply unavoidable and definitely on its way.

 

Think of how much building has gone on in the past 50 years. It is staggering. But the buildings are getting older. As the buildings start to approach the 40 year mark or more, things start to break down and repairs become unavoidable. Concrete restoration is incredibly expensive, and unavoidable. Replacement of pipes is incredibly expensive, and unavoidable. And the same goes for electrical renovations and roof replacements. All unavoidable. Yet, so many people, especially seniors, are rolling the dice thinking that none of these repairs will be necessary while they own the property. That may be true for now, but eventually, everyone rolls a 7.

 

If you roll a 7 at the craps table however, you get up and go home. If you roll a 7 at the condo and all these repairs are necessary while you’re the owner, you may lose your home because year after year after year you decided to waive the funding of reserves and now you have nothing to fall back on.

 

So what’s the answer? I know this is going to sound unpopular, but if action is not taken now it’s going to result in much bigger problems of people losing their homes later on. So, like it or not, some form of reserves should be mandatory and not subject to being waived. There, I said it. Let’s streamline the way reserves are calculated. Let’s get rid of the “life expectancy” formula the state says you should follow but nobody does. It’s a joke anyway. We all know the truth that the life expectancy of the roof somehow gets longer, the closer you get to the original estimate of how long it was going to last. Five years ago it had a five year life expectancy. Money is tight, so today it has a new 10 year life expectancy. Somehow, like fine wine, the roof got better with age. We all know that happens, and it happens every day. So how about we make things simple. Let’s just say every condominium must contribute 10% of its annual budget to reserves for roof, plumbing, electrical, structural and painting. It all goes into one pot and it can be used for any repair necessary for those categories. It can’t be waived. If however an association wants to contribute more, they can.

 

If we implemented this, I’m guessing the average monthly increase for most condominiums that are not already reserving funds would be anywhere from $25.00 to $75.00 per month. I know that for some that increase is not easy. However, it’s going to be a lot more expensive if any one of these inevitable repairs become necessary and it’s time to pass a special assessment because there are no reserve funds. God forbid two of these items need repair. Sorry, but it’s still easier for a person on a fixed income to pay an extra 30 or 40 dollars per month than it is to come up with a special assessment of a few grand.

 

Mandatory reserves, for even modest amounts, is a necessary evil. I say so because I see the hand writing on the wall. I see buildings getting older and unavoidable repairs coming on strong. I also see hurricane seasons becoming active with the potential to cause catastrophic results to our communities. I see fear in the faces of senior citizens now when faced with small special assessments. What I don’t see is sound financial planning for the inevitable, and I don’t want to see people, especially the elderly, losing their homes when they don’t have the money to pony up and fix up their homes when a special assessment comes their way.

 

This year The Florida Legislature looked into the future and envisioned that in the next decade or so, we will all be driving electric cars. So, they bravely passed an electric vehicle statute to deal with that issue right now, before the issue got out of hand a decade from now. I’m asking them to do the same thing now and protect people from losing their homes over the next decade or two by ensuring the condo has a piggy bank to shake lose when massive expensive repairs become unavoidably necessary. Mandatory reserves are needed now.

 

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Florida’s condominium laws will undergo a top-to-bottom review by a task force established by the Florida Bar Association after the deadly collapse of the Champlain Towers South condo building in Surfside.

Florida’s condominium laws will undergo a top-to-bottom review by a task force established by the Florida Bar Association after the deadly collapse of the Champlain Towers South condo building in Surfside.

  • Posted: Jul 08, 2021
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Florida’s condominium laws will undergo a top-to-bottom review by a task force established by the Florida Bar Association after the deadly collapse of the Champlain Towers South condo building in Surfside.

Members of the task force who confirmed its existence to The Washington Post on Tuesday said their goal is to review state laws and regulations that govern condo developments, board operations and maintenance rules, and recommend potential changes to the governor and the state legislature.

Condo regulations in Florida have come under close scrutiny since the tragedy in Surfside on June 24, with at least 46 people confirmed dead and 94 still unaccounted for as of midday Wednesday. While investigators warn it could be months before a cause of the collapse is known, attention has turned to the decisions made — or not made — by city officials, consultants, developers and the residents and board members of Champlain Towers South.

“What we’re looking at are specific changes to prevent that from happening again,” William Sklar, an adjunct faculty member of the University of Miami’s law school and task force chair told The Post. “We also want to be realistic relative to the needs of unit owners, and we don’t want to dissuade [board members] from service.” Navigating those competing interests, Sklar and others acknowledged, is a complex mission. What lures many to condos in the first place is precisely what can eventually undermine them: Shared responsibility for maintenance with the perks of private ownership.

‘I anticipate a lot of push-pull’

Despite the detailed, extensive condo laws in Florida, several real estate experts said the rules are often easy to manipulate or have toothless enforcement.

“Condos are so critical to our local economy, but the state does nothing to bring clarity to it because it’s a cash cow,” said Peter Zalewski, a Florida condo industry analyst. “No one wants to kill the market prices.”

Condo owners and developers aren’t the only ones who may be skittish of changes: Politicians eager to enact tougher oversight in the wake of Surfside are still responsive to the will of voters, said Peggy Rolando, a Miami-based real estate lawyer and co-chair of the Florida Bar Association’s Condominium and Planned Development Committee.

“In Florida, condo owners are a hugely powerful political force,” Rolando said. Board meetings of well-heeled condo associations warrant campaign stops, and some buildings are even large enough to be their own voting precinct, she said.

Even tightening regulations in the name of building safety is likely to face resistance. Experts agreed the current rules that give condo owners significant leeway to defer costly maintenance can lead to a worst-case scenario in which a building becomes too unsafe to inhabit and too expensive to repair.

At the same time, they recognized putting off pricey fixes is sometimes a matter of short-term economic survival. In a place like South Florida, affordable housing is scarce, and many residents are fixed-income retirees who can’t easily absorb sudden spikes in homeowner fees.

“I anticipate a lot of push-pull,” Rolando said. “There’s an expression in South Florida that ‘you’re throwing grandma off the balcony’: If you’re passing laws saying ‘you must fully fund reserves for the entire building’ and price people out of their homes, you’re going to have a very unhappy constituency.”

Scrutiny on volunteer condo boards

After the collapse in Surfside, attention — and blame — quickly settled on the Champlain Towers South Condominium Association.

The association is the subject of at least 10 lawsuits filed since the building fell. In each of the complaints, residents detail what they say are oversights and failures of the condo board to act on crucial maintenance they argue contributed to the building’s structural instability.

But a Washington Post investigation found that while plans for repairs dragged on for years even as the building’s 40-year safety certification was coming due, dozens of unit owners in the condo balked at the estimated repair costs, which eventually tallied $15 million. In April 2019, dozens of owners signed a letter raising last-minute objections to the repair plans and asked for a lower assessment. A few months later, five of the seven board members quit.

The tension exhibited by the fallen tower’s condo association underscores why a condo building’s troubles don’t start and end with its board of directors, said Peter M. Dunbar, a longtime legal expert in Florida real estate who has written several reference books on Florida condominium law and management used by the state.

Florida condo board seats are volunteer roles in which elected members are not required to have any specialized training or vetting, even in buildings where board members are responsible for reserve accounts worth hundreds of thousands or even millions of dollars and approve maintenance for complex amenities like elevators and swimming pools.

New board members have 90 days to take an elective course approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes Complaints/​Investigations or simply file a statement saying they have read the condominium’s rules and legal documents and understand their duties as a board member, Dunbar said.

“The lack of knowledge is not often where I find the biggest concerns,” Dunbar said. “You may know what you’re supposed to be doing, but are you doing it in a timely fashion, and are you doing it to the extent it’s required? To me, that’s a bigger issue.”

Anyone who serves as a director of an association has what Florida law states is a “fiduciary duty” to the association, or an obligation to act in the association’s best interests where maintenance, finances, quality of life and property value are concerned. In other words, Dunbar said, board members don’t have to know how to fix everything; they just need to hire the right people to assess what needs fixing and then act on those recommendations.

“But because they’re elected, they also have the pressures of their constituents,” Dunbar said. “The difference for the volunteer board is, you can do your best, and a resident can still say, ‘I don’t want to pay,’ and recall you.”

Public battles over personal budgets

Condo board members face personal liability if they’re found to have acted negligently or criminally in an individual capacity. But most problems that befall condo associations are not from nefarious board members or tightfisted unit owners, said Rolando, the Florida Bar Association’s Condominium and Planned Development Committee co-chair.

More often, personal circumstances or simple human nature cloud decision-making.

“There are very, very few associations that have really extensive, comprehensive reserve structures,” she said. “But if you know your neighbor just lost their job, or just sent their kid off to college, what are you going to do? You have an obligation to do the right thing for the association. But you have people who don’t want to or can’t afford to do the right thing.”

Documents from the Champlain Towers South Condo Association revealed infighting among neighbors as building repairs grew more urgent and more costly; one neighbor recounted toxic board meetings that would devolve into “screaming and yelling.”

The tension can erode the quality of life in a building where board members and condo owners pass one another every day in the lobby, by the pool or walking the dog, Rolando said.

“I have a lot of sympathy for board members because I think it’s rewarding that you can do something that improves your community and has a direct impact,” she added. “But it’s also enormously demanding, unpaid and thankless. I guess it’s like being a mom or something.”

The Florida legislature requires condo associations to have financial reserves for painting, roof repair, paving and any item of deferred maintenance that exceeds $10,000, Rolando said.

Rolando said she sympathizes with unit owners who face unmanageable costs that can balloon from years of neglected or delayed maintenance.

“Mandatory reserves are probably the right thing to do fiscally. But when you’re dealing with human beings with myriad financial issues, do you want to force people into a situation where they can’t afford to pay and will have to sell their unit?” Rolando said. “There are no good answers.”

Transparency and tougher rules

Members of the new safety task force hinted that changes to safety certifications and inspection schedules are likely to meet the least resistance.

Sklar, the task force co-chair, suggested that South Florida’s 40-year safety recertification program could be significantly narrowed to 10, 25 or 30 years and that it could be applied uniformly statewide; right now, it applies only to Miami-Dade and Broward counties.

Other considerations include expanding inspections to include geological and hydrological factors affecting building stability and structure, and periodic and comprehensive reviews of specific building elements such as concrete, rebar and electrical.

Sklar said the law allowing condo owners to hold an annual vote and waive fully funding the association’s reserves will need to be re-examined as well.

The task force will also consider ways the government can help residents who can’t afford the reserves or maybe bought into a lower-cost building or live on a fixed income.

“We may review if there’s a low-cost, government-backed, subsidized financing available,” he told The Post.

Zalewski, the condo industry analyst, said he hopes the task force also considers making real estate transactions more transparent and favorable to buyers. Under Florida law, a prospective condo buyer has a 15-day right of rescission, or ability to pull out of a pending condo purchase, if they are buying directly from a developer; if the purchase is made from an existing condo owner, the period shrinks to three days.

Zalewski, who is critical of the three-day rescission period, said that amount of time does not give a prospective buyer an adequate period to do the research and inspections that could prevent them from buying into a condo building that has hidden costs lurking down the road.

“The three days doesn’t make sense if you’re worried about the buyer,” he said. “It would change the market overnight because it would force everyone to be on the up and up.”

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If a 2008 Florida law that required condos to plan for repairs had still been in place, “this never would have happened,” said the legislator who sponsored the law.

If a 2008 Florida law that required condos to plan for repairs had still been in place, “this never would have happened,” said the legislator who sponsored the law.

  • Posted: Jul 08, 2021
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If a 2008 Florida law that required condos to plan for repairs had still been in place, “this never would have happened,” said the legislator who sponsored the law.

 

SURFSIDE, Fla. — Late last year, after years of delays and disputes, the Champlain Towers South Condominium Association began a desperate search for $16.2 million to fix major structural damage that was slowly threatening the Surfside high-rise — and that may have contributed to the building’s partial collapse June 24.

The obvious place to look was the building’s reserve fund — extra money socked away to cover the cost of future repairs. But the account held just $777,000, according to condo board documents — nowhere near enough to soften the blow.

The collapse, which killed at least 64 people and left 76 others missing, occurred before the condo board could collect the needed money from residents and begin repairs. The cause of the collapse is unknown, and investigators, experts and advocates are trying to determine whether the uncompleted repairs played a role, whether the board could have seen the problem coming earlier — and whether a Florida law regulating condo repairs that was repealed a decade ago could have made a difference.

 

One way to keep track of needed repairs is a “reserve study,” in which condo boards bring in experts like engineers or certified specialists every few years to inspect buildings and estimate how much the boards should collect from residents to prepare for future fixes. The building’s financial documents, obtained by NBC News and NBC 6 South Florida, show that Champlain Towers South had not done a professional reserve study since at least 2016. That decision was legal, but it meant that planning was left to the board, a shifting group of volunteers with little training in building maintenance.

“If the owners would have had a reserve study, if the board was proactive and had funded its reserves, this never would have happened,” said Julio Robaina, a former Republican state legislator.

Robaina sponsored a 2008 law requiring condo associations to hire engineers or architects to submit reports every five years about how much it would cost to keep up with repairs.

The law lasted just two years before it was repealed in 2010, after Robaina left office. Robaina blamed pushback from real estate lawyers and property managers, who he said claimed that the law was too burdensome for condo owners. The legislator who sponsored the repeal, former state Rep. Gary Aubuchon, a Republican real estate broker and homebuilder, did not reply to messages seeking comment.

 

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

“One of the steps that should be taken by a building, especially an aging building, is having adequate funds available so that when you have to face significant cost challenges there’s an appropriate amount of money available,” said Gary Mars, a South Florida lawyer who represents condo associations.

A survey last year by the Community Associations Institute found that most homeowners associations are hesitant to increase residents’ fees, anticipating opposition, and therefore fail to plan for long-term infrastructure fixes.

“In postponing inspections, reserve studies, and — ultimately — complete repairs or renovations, boards often end up facing an exponentially more comprehensive and expensive project in the long run,” the report said.

 

Maxwell Marcucci, a spokesman for the Champlain Towers South Condominium Association, declined to comment on reserve studies. In a previous statement to NBC News, he said the condo board was doing its best to ensure the building was safe. “They are not engineers and not building safety experts,” Marcucci said. “They hired experts, trusted experts, and at no point did the experts indicate that there was a threat of imminent collapse.”

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

Robaina, who co-owns a property management company, said maintaining healthy reserves “is the single most important action that a condominium board needs to take.”

Florida law requires condo boards to maintain reserves for repairs over $10,000, but it does not say exactly how much to set aside. That means condo boards have some flexibility in avoiding saving for repairs that do not need to be made right away.

In addition, the law allows condo buildings to waive the reserve requirement altogether. Once it has passed its annual budget, a condo board can give residents the opportunity to opt out of collecting reserves by a vote of a majority of unit owners. The votes are common in Florida condo buildings, condo lawyers say.

That is what it appears Champlain Towers South did, lawyers and reserve experts said.

The experts pointed to the board’s reliance on special assessments — additional fees on top of residents’ normal monthly payments — to fund needed repairs. The board imposed a $1 million special assessment in 2016 for hallway renovations and a $350,000 special assessment in 2019 for work on a generator, a fuel pump and a fuel tank. Such lump-sum levies are indicative of a building whose owners have decided not to set aside enough reserves through regular monthly fees, choosing instead to wait until a big-ticket repair is needed to ask residents to pay for it, experts said. Many associations make that choice by repeatedly voting to waive or reduce the funding of their reserves.

“I can’t help but think that the building did that for years and years, which is why there was not enough funds available,” said Matthew Kuisle, Southeast regional director for Reserve Advisors, which prepares reserve 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 that approach started to become clear in 2018, when the board began inspecting the building before a checkup mandated by Miami-Dade County for buildings that reach 40 years old. In an October 2018 report, engineer Frank Morabito alerted the board to “major structural damage” to concrete slabs underneath the building’s pool deck and its entrance drive. He blamed a “major error” in the building’s construction and years of corrosion. He estimated the cost of repairs at $9 million.

Reeling from sticker shock, the board invited a Surfside building official to its November 2018 meeting. The official told the board that the building was “in very good shape,” according to minutes of the meeting. Some residents have said that led them to believe the situation was not dire.

Even so, the board began trying to find a way to repair the damage — and to pay for it.

Disagreements over the costs frustrated board members. Five members quit over two weeks in fall 2019. The condo association has had four presidents since 2018.

 

By late last year, the board had accepted that there was no safe way forward without doing the massive reconstruction Morabito recommended, along with repairs to a deteriorating roof. Morabito began preliminary work and found that the damage discovered in 2018 had gotten worse. The bill rose to more than $16 million.

The board scrambled for money. It found $707,000 left over from the previous special assessments and $777,000 more in reserves. But a quarter of the reserves were designated for insurance deductibles, leaving $556,000. The board chose not to tap the reserves just in case there was another emergency. That meant the building was short by $15.5 million, which the board voted in April to raise through a special assessment. The cost to residents would be $80,000 to $360,000 per unit.

“A lot of this work could have been done or planned for in years gone by. But this is where we are now,” board President Jean Wodnicki wrote to residents before the vote.

By last month, the board had started work on the roof, and it put other repairs out for bid. Responses were due July 7. Two weeks before the deadline, the building partly collapsed.

The board’s nearly three-year struggle to start work on the concrete replacement project has loomed over the catastrophe’s aftermath. Investigators have not determined what caused the failure; the deteriorating supports are among the possibilities.

Experts say the extent of disrepair documented in the 2018 report raises questions about how the damage went unnoticed previously.

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

 

Documents reviewed by NBC News and NBC 6 South Florida, including audits, budgets, financial statements and board meeting minutes, do not indicate when the structural issues noted by Morabito started, though the board did pay to replace leaking pipes in the building’s parking garage in 2016. But the documents do show that the board did not perform professional reserve studies and instead relied on board members to determine how much to set aside for repairs. In 2016, an accountant performing a year-end audit noted that “an independent study has not been conducted to determine the adequacy of the current funding” and that “the estimates for future replacement costs are based upon estimates provided by the budget committee.”

Audits conducted by the same accountant in 2017, 2018 and 2019 included the same language. Last year, a different accountant provided a similar disclaimer.

Mars, the lawyer who represents condo associations, said he believes that the note was “the CPA saying, ‘We don’t have any official documentation to rely on.'”

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

 

Jeffrey Rembaum, another lawyer for condo associations, pointed to figures in the audits that showed that from 2016 to 2020, the board did not update the amount of money needed to replace balconies and concrete. Each year, the board estimated needing $320,000 for the work, even after Morabito’s report found that much more extensive and costly repairs were needed.

“We know the building had millions in concrete repairs on the horizon,” Rembaum said. “So how did it come up with $320,000 for their current needs? If they’d had a reserve study and an engineer looked at what they had, they would have come up with a higher number. That suggests the board wasn’t regularly updating it.”

He added: “This is the effect of the Florida Legislature not requiring a reserve study by qualified people.”

More than a decade since his short-lived law on reserve studies was repealed, Robaina said he hopes lawmakers will change course and reimpose the mandate.

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

Jon Schuppe reported from New York; Phil Prazan reported from Surfside, Florida

By Jon Schuppe and Phil Prazan, NBC 6 South Florida

 

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A newly filed bill by Senator Jason Pizzo, SB 1490, could create a significant change in terms of an association’s ability to invest the community’s operating and reserve funds in depositories other than a traditional bank or savings and loan.

A newly filed bill by Senator Jason Pizzo, SB 1490, could create a significant change in terms of an association’s ability to invest the community’s operating and reserve funds in depositories other than a traditional bank or savings and loan.

  • Posted: Feb 26, 2021
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A newly filed bill by Senator Jason Pizzo, SB 1490, could create a significant change in terms of an association’s ability to invest the community’s operating and reserve funds in depositories other than a traditional bank or savings and loan. 

 

For years there have been significant legal constraints on a condominium association’s ability to use reserve funds. In addition to the statutory requirement to obtain membership approval for non-designated reserve usage, the prevailing school of thought was that association funds could not be invested since investments can and do fail.

A newly filed bill by Senator Jason Pizzo, SB 1490, could create a significant change in terms of an association’s ability to invest the community’s operating and reserve funds in depositories other than a traditional bank or savings and loan.

The bill provides as follows:

“Unless otherwise prohibited in the declaration, and in accordance with s. 718.112(2)(f), an association, including a multicondominium association, may invest any funds in one or any combination of investment products described in this subsection.”

If this bill passes and an association invests funds in any type of investment product other than a depository account, the association must meet all of the following requirements:

  1. The board shall annually develop and adopt a written investment policy statement and select an investment adviser who is registered under s. 517.12, F.S. and who is not related by affinity or consanguinity to any board member or unit owner. Any investment fees and commissions may be paid from the invested reserve funds or operating funds.
  2. The investment adviser selected by the board shall invest any funds not deposited into a depository account in compliance with the prudent investor rule in s. 518.11, F.S. It is important to note that the statutory prudent investor rule is a test of conduct and not resulting performance. Under this statute, no specific investment or course of action is, taken alone, considered prudent or imprudent. Instead, the investment adviser is deemed to be acting as a fiduciary and he or she may invest in every kind of property and type of investment, subject to that statute. The fiduciary’s investment decisions are evaluated on the basis of whether he or she exercised reasonable business judgment regarding the anticipated effect on the investment portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action. Although the proposed statute requires that funds invested be subject to insurance under the Securities Investor Protection Corporation, it is important to note that this insurance is only there if the brokerage firm fails, not if the investment turns out to be ill-advised and loses the association’s money.
  3. The investment adviser shall act as a fiduciary to the association in compliance with the standards set forth in the Employee Retirement Income Security Act of 1974 at 29 U.S.C. s. 1104(a)(1)(A)-(C).
  4. At least once each calendar year, the association shall provide the investment adviser with the association’s investment policy statement, the most recent reserve study report or a good faith estimate disclosing the annual amount of reserve funds which would be necessary for the association to fully fund reserves for each reserve item, and the financial reports.
  5. The investment adviser shall annually review these documents and provide the association with a portfolio allocation model that is suitably structured to match projected reserve fund and liability liquidity requirements. There must be at least thirty-six (36) months of projected reserves in cash or cash equivalents available to the association at all times.
  6. Portfolios managed by the investment adviser may contain any type of investment necessary to meet the objectives in the investment policy statement; however, portfolios may not contain stocks, securities, or other obligations that the State Board of Administration is prohibited from investing in under ss. 215.471, 215.4725, and 215.473, F.S. or that state agencies are prohibited from investing in under s. 215.472.

Lastly, the bill would exempt registered investment advisors from having their bids subjected to the competitive bidding requirements found in Section 718.3026, F.S.  The companion bill to SB 1490 is HB 1005 (Killebrew/Fine).

As more associations change their old habits and begin to fund reserves, the allure of more aggressive investment vehicles for these funds, which can be substantial amounts, is undeniable. However, the risk is also undeniable. As such, if this bill becomes law and the investment of reserves becomes available, boards are strongly encouraged to take an extremely cautious, measured approach with reserves.

While investment of your association’s operating and reserve funds might result in a substantially better return than a savings account, you might also see significant losses. The investment of association funds must be done with careful consideration of the demographic in your community, the age of your buildings and facilities, the required liquidity of your funds and, most importantly, the sensitivities and risk tolerance of your membership all taken into account. If your members fuss about your board’s landscaping decisions imagine the potential fallout if you make the wrong investment decisions!

 

Very truly yours,

Donna DiMaggio Berger, Founder & Executive Director
Community Association Leadership Lobby
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Axela Technologies Secures Series A Financing Round Led by Blueprint Equity by Mitch Drimmer

Axela Technologies Secures Series A Financing Round Led by Blueprint Equity by Mitch Drimmer

  • Posted: Jan 25, 2021
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Axela Technologies Secures Series A Financing Round Led by Blueprint Equity

by Mitch Drimmer / Axela Technologies

MIAMI, January 19, 2021 (Newswire.com) – Axela Technologies, the nation’s leading provider of collection services to the Community Association Industry, announced today that it has received a minority growth equity investment from Blueprint Equity. The amount of the deal was not disclosed. In conjunction with the investment, Blueprint Equity will join the Board of Directors.

Since launching in 2018, Axela has demonstrated the effectiveness of its software solutions that manage an association’s collection files. Unlike traditional attorneys or collection agencies, Axela deploys a multi-touch, digital-first approach to engage and work with unit owners that have fallen behind on their assessments.

“Resorting to legal action and foreclosure should be the absolute last step to any collection effort,” states Martin Urruela, Axela Founder and CEO. “Yet for years, it’s been the knee-jerk reaction by community associations when a homeowner falls behind on just a few months of assessments. It doesn’t have to be so drastic and costly, and that’s where we come in.”

The financing round builds on an exceptional year for Axela, which saw its customer count grow by over 200% in 2020. The company currently works with hundreds of management companies in 21 states, and boasts a 99% success rate of resolving collection files without resorting to legal action.

“What really stuck out to us was Axela’s approach to collections, long considered an unattractive and confrontational industry,” said Sheldon Lewis, Managing Partner of Blueprint, who also joined the company’s Board.” Axela was built around a philosophy that by helping the homeowners, they help the association, and everybody wins. Powered by the right technology, the company is well-positioned to scale across this vast market and become the industry standard.”

When asked about the use of the investment funds, Urruela stated that the company would aggressively expand its sales and marketing efforts, as well as double down on product and engineering. “We have to get the word out that we have a new and innovative solution to an age-old problem. We’re extremely proud of our customer retention rate – we’ve never lost a client, or experienced a scenario where an association decides to go back to the old way of doing things after working with us.”

 

ABOUT AXELA TECHNOLOGIES

Axela Technologies is a collections firm that specializes in recovering delinquent assessments for the benefit of community associations. Axela reduces the cost of outreach and engagement by automating much of the standardized collections process, all while providing exceptional customer service and a centralized platform for all stakeholders to promote transparency and efficiency. To learn more about Axela, visit axela-tech.com.

 

ABOUT BLUEPRINT EQUITY

Blueprint Equity provides expansion capital to rapidly growing enterprise software and technology-enabled services businesses across North America. To learn more about Blueprint Equity, visit onblueprint.com.

 

 

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Here’s how the coronavirus pandemic will impact hurricane season in Florida

Here’s how the coronavirus pandemic will impact hurricane season in Florida

  • Posted: Jun 09, 2020
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Here’s how the coronavirus pandemic will impact hurricane season in Florida

COVID-19 forcing state to revisit evacuation, shelter plans

Preparing for hurricane season is always a daunting task for many Floridians, but with the coronavirus pandemic adding a few extra barriers, your preparations will likely require a few extra steps this year.

According to Eric Alberts, Orlando Health’s corporate director of emergency preparedness, thanks to COVID-19, there are quite a few extra things you’ll need to take into consideration and plan for before a storm.

For example, will you be able to find the supplies needed for your storm kit with stores sold out of certain items due to shoppers hoarding them during the pandemic? And if you’re one of the countless Floridians who is out of work because of the health crisis, how can you afford to properly prepare your home for a storm or repair damage still left behind from a previous one? Oh, and let’s not forget the price of insurance. What about shelters? What will those look like now that the CDC is asking everyone to practice social distancing?

We know those are probably just a few of the concerns you have, so News 6 anchor Ginger Gadsden spoke to Alberts to tackle them one by one and find out everything Floridians should consider when preparing for a storm.

 

Supplies

Let’s start by talking supplies.

Of course, you’ll need the items that have always been recommended in a hurricane kit – you can find a complete hurricane preparedness checklist available for download here – but that’s not all, according to Alberts.

“You can’t just think about having at least 72 hours of food and water, medications, flashlights, batteries and all that other stuff. You also have to think about your health,” Alberts said. You’re going to have to think through masks and whether you have additional masks, wipes or sanitary wipes. You’ve got to think through gloves in certain situations, protective clothing, in some regard.”

Some of the additional items Alberts listed, including masks and gloves, have been difficult to come across because of the coronavirus pandemic, which is why he recommends starting your supply search sooner rather than later.

 

“Start now and don’t wait until the hurricane’s here because you definitely won’t be able to get it then,” Alberts said. “And unfortunately, I don’t believe that these supply shortages are going to go away anytime soon. I think they’re going to last through at least the summer at some point.”

State officials have said they’re also taking this into consideration as they revisit their plans for hurricane season.

Division of Emergency Management Director Jared Moskowitz said his agency has arranged to add face masks to the state’s stockpile of storm supplies.

“We’re going to have 10 million masks in reserve by the time the hurricane season starts,” Moskowitz said. “And we signed a long-term deal with Honeywell to help get us 12 million N95 masks over the next year directly from the manufacturing plant, with a significant portion of that being delivered during hurricane season.”

Alberts said that even if the personal protective equipment shortages let up, it could still be difficult to find the right supplies because of shoppers who hoard them when they are available in fear of not being able to find them next time they need them (same goes for toilet paper, as we all know by now).

“Even if the items do begin to hit the market or go back on the market, some people will still do hoarding, they’ll still end up buying supplies for their families and their friends. They know they can’t get it and that will put a strain on the system for quite some time,” Alberts said.

Alberts said when it comes to hurricanes, the bottom line is: You need a lot of supplies. Add COVID-19 into the mix and you need even more. His best advice? Start gathering those items now, because they may only be more difficult to find when you actually need them.

 

 

Preparing your loved ones

Alberts said it’s important to not only get supplies and plans in order for yourself but also those with whom you live and others you might care for, especially if they have any special needs.

With many still feeling on edge because of the pandemic, it may be difficult to have the conversation, but Alberts said it’s important you don’t want to prepare your family’s emergency plan.

“Now’s the best time to get your kit and your plan together. So what I mean by that is, you know, you live with others, whether it be your significant other, your family or friends. Just get them together and just sit down and talk to them,” Alberts said.

While building your plan, Alberts said you should ask yourselves, “What is it we’re going to do if we experience a tropical storm or hurricane soon or later in this season?”

From there, he recommends you start writing things down and finalizing a game plan that you’ll all be ready to put into action at any given time.

“Whatever you talked about or you wrote down, make sure you actually do it. People need plans, they need education, they need training. And if you don’t have that, then you feel weakness, you feel fear, and you feel susceptible to rumors, and chaos and stress,” Alberts said.

He said having that plan in place and knowing everyone is on the same page will help ease some of the anxieties that could come with uncertainty in the future.

If anyone in your family has special health needs, Alberts said you’ll want to keep those in mind and include any extra steps you might need to care for them in the event of an emergency in your family’s plan.

 

 

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Alberts recommends individuals with special needs register with the Florida Special Needs Registry.

He said doing so will inform local officials that a member of the community is at risk and allows them to reach out before a storm and make sure the individual with special needs is safe. Officials can also reach out to those who are registered to follow up with them after a storm.

 

Caring for the elderly

Just as you should for other members of your family, Alberts recommends keeping the care of any elderly family members a priority in your preparedness plan.

Get any medication and other needed supplies in order ahead of time so they’re ready if and when your family needs to evacuate.

If your loved one is a resident at a long-term care facility, Alberts recommends having storm prep conversations with those who work at the facility, especially in the months following the COVID-19 pandemic, with visitations temporarily paused to protect the health of the most vulnerable population.

“Well, it really depends on where we’re at in response to COVID-19. They may still be in the status of not allowing others into their facilities. So if that’s the case, you really end up having to trust the management and the administration of that facility to do the right thing for your loved one. And you always have the right to call them and ask for their administration,” Alberts said.

He said you should ask the administration at the facility about their plans for emergencies so that, if you’re uncomfortable with them, you have time to make changes.

“I hate to say it this way, but put some pressure on them if you don’t feel comfortable with their actions. You know, if there’s a tropical storm or hurricane coming directly at that facility and you don’t feel safe with them being there, then you can really impress upon them how you feel and that your loved one really needs to be moved somewhere else,” Alberts said.

Alberts said don’t be afraid to call and ask to speak with the facilities’ leadership because the person at the front desk may not have all the answers.

He said to call and ask if you should drop off any extra tissues, sanitary or moisturizing cloths or even medication to let them know you’re planning for the care of your family member and they should step up their planning efforts, too.

 

 

Preparing your home

It’s not uncommon to drive around Florida and see blue tarps on homes months after a major storm hits part of the area. Something you don’t want to see, though, according to Alberts: Blue tarps still being used as we enter the next storm season.

Alberts said Floridians should work to have any home repairs completed by the time hurricane season arrives so that their home can better weather the next storm.

With many Floridians unemployed due to the pandemic, covering those repair costs may be difficult to impossible for anyone struggling to make ends meet.

Alberts’ advice is to financially plan as much as possible and look for any opportunities to save so that you have some extra funds available in the event of an emergency.

“One of the recommendations is to have additional monetary savings with you so that you’re able to pay for response and recovery efforts,” Alberts said.

Some people will opt out of insurance to save some money when their budget is tight, but Alberts said that presents its own set of risks and could actually cost you more down the road, should a storm damage your home.

“When you’re low on financial or monetary funds, you often think, ‘Hey, can I just not pay this insurance?’ or, ‘Hey, I don’t need this anymore,’ but with that comes a lot of additional risks or hazards or threats to your own financial well-being, right?” Alberts said. “So if you have damage at your home, or even your business, how are you going to go ahead and pay for that if you don’t have the necessary insurance?”

 

Safely seeking shelter

If you’ve ever visited a storm shelter while a hurricane was threatening Florida, you know they can get pretty crowded.

With social distancing now required or strongly encouraged in most places and COVID-19 still expected to be around through hurricane season, public shelters will likely look different than they have in the past, according to Alberts.

“When you think of shelters for hurricanes, and you’ve seen pictures or videos before, you’ll probably see a lot of mass gatherings of people for extended periods of time. Well, we can’t really do that now with COVID-19,” Alberts said. “So, you know, local, state and federal partners are really looking at the sheltering models to say, ‘Hey, what can and should we do in our shelters (to) minimize the impact of COVID-19 on the shelter as well?’”

Moskowitz said Florida emergency officials have been working with FEMA to revise their plans for evacuations and shelters.

In early May, state officials said they were looking at protocols for shelters that range from separating people based on temperature checks to non-congregated sheltering in hotels.

FEMA has since released its COVID-19 Pandemic Operational Guidance for the 2020 Hurricane Season, which outlines how the agency plans to adapt its response and recovery efforts in light of COVID-19.

Alberts said when it comes to evacuating to a shelter, Floridians should keep the following tips in mind:

“If it’s a shelter, just make sure you follow social distancing with COVID-19 and just take your extra precautionary measures with your personal protective equipment. Make sure that you’ve got your required medications and you’ve got your legal documents, any kind of insurance and identification. Make sure those are in a waterproof sealable bag because you don’t want to be hunting for those whenever it’s time to leave,” Alberts said.

 

Plan ahead

Alberts said planning for a hurricane requires a lot of preparation and supplies, and planning for storm season with a pandemic still underway requires even more. The most important thing Floridians can do to make sure they’re ready for hurricane season, according to Alberts, is plan ahead.

“The recommendation there is to start building your plan now, start building your kit now. Don’t wait until a hurricane is knocking at the door so to speak, you know, start the efforts now to get the supplies that you need. Don’t wait.”

 

 

 

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As Stimulus Funds Dry Up, Private Sector Firm Provides Funding to Community Associations by Axela Technologies

As Stimulus Funds Dry Up, Private Sector Firm Provides Funding to Community Associations by Axela Technologies

  • Posted: May 08, 2020
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As Stimulus Funds Dry Up, Private Sector Firm Provides Funding to Community Associations by Axela Technologies

Axela Technologies’ HAAP program allows community associations to tap into a non-recourse funding option to receive a much-needed cash injection.

 

Axela Technologies, the leading provider of collection solutions for community associations, has announced a funding program that will provide a financial lifeline at a time when HOAs and condos need it most. The funding is available nationwide, effective immediately.

“We realize that times are tough, and they are going to get more difficult for community associations,” said Martin Urruela, Axela’s CEO. “Community associations have received little help from the federal or state governments and are suffering due to the unforeseen hardships placed on their owners, so we’re stepping up to help.”

HAAP, short for Homeowner Assessment Assurance Program, advances a portion of a community’s receivables in the form of an immediate cash injection. It is not a loan; it is non-recourse, interest-free, and does not require the association to sign a note or a security interest. Axela is repaid with funds recovered through their collection of delinquent accounts.

“Besides being not-for-profit entities, associations are a zero-sum business and rely on owners’ assessments to pay their bills,” continues Urruela. “As a collection firm, we know that most, if not all assessments will be recovered at some point, but we don’t know when. Associations often don’t have the luxury to wait, but we do, so we’re providing the funds up front to help them meet their day-to-day financial requirements.”

Until now, Axela’s HAAP program has been available exclusively in Florida. Prior to the pandemic, approximately 10 percent of the company’s Florida clients had applied for an advance but that number has steadily increased in recent weeks. The spike in demand is what prompted the company to open the program to other states.

“While HAAP is innovative and most certainly helpful, the way it works is simple,” adds Urruela. “Instead of funding clients after we collect their money, we’re funding them up front. If for whatever reason, we are unsuccessful in collecting, we lose. The advance is non-recourse, so the association will never be on the hook for amounts that we advance them.”

Axela’s clients who have taken advantage of HAAP have praised the program.

“One of our associations had their insurance renewal coming up, but didn’t have the money,” said Fabio Setton, owner of PMI Top Florida Properties, a management company based in Aventura, FL. “Axela stepped up and advanced the funds within days of our request, which saved the association from having to pass a special assessment or risk losing insurance coverage.”

Taylor Pena of Marquis Association Management stated, “Axela has been providing funding for our community for nearly two years, allowing us to replicate a perfect cash flow scenario, despite the fact that several owners were not making timely payments.”

The application process requires community associations to submit a roster of units that would be placed into collections with Axela. The underwriting process is fully automated, and associations can be approved and funded within 72 hours. More information on the program is available at www.axela-tech.com/haap

 

ABOUT AXELA TECHNOLOGIES

Axela Technologies is a collections firm specialized in recovering delinquent assessments for community associations. Axela reduces the cost of outreach and engagement by automating much of the standardized collections process while providing exceptional customer service and a centralized platform for all stakeholders to promote transparency and efficiency.

To learn more about Axela Technologies, visit www.axela-tech.com

Members of The State of Florida Property Management Association (SFPMA.Org)

 

 

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After the Pandemic: How Community Associations Can Recover in the New Economy. by Mitchell Drimmer of Axela

After the Pandemic: How Community Associations Can Recover in the New Economy. by Mitchell Drimmer of Axela

  • Posted: Apr 28, 2020
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After the Pandemic: How Community Associations Can Recover in the New Economy.

by Mitchell Drimmer of Axela Technologies

 

Is Your Condo or HOA Prepared?

Download : How Community Associations Can Recover in the New Economy

With a pandemic crippling the global economy, community associations must prepare for the effects this will have on the housing market.

We must face the grim reality that the ripple effects of the coronavirus may cripple our economy for years to come, long after the virus itself has been contained, as people lose their incomes and families struggle to make ends meet.

Community associations are already beginning to feel the effects of the recession with homeowners in financial crisis opting not to pay association fees, and this trend looks like it will get worse before it gets better. And with foreclosures on temporary deferment during the shutdown, the typical methods communities use to collect are unavailable.

But there is hope for communities to navigate this new recession economy. Community associations are one of the few industries that can successfully weather economic depression. You just need to know what tools to leverage to keep the budget healthy.

The American consumer will be making choices: “Should I pay my Visa or Mastercard bill or my community association fees?”

This whitepaper explores the options that are available to community associations and reveals what actions you can take to not just protect your community, but to thrive in the new recession economy we are facing.

 

 

HOW THE FUTURE COLLECTS

Axela Technologies is dedicated to helping create streamlined accounts receivable and collections for management companies, condo associations and homeowners associations.

Our proven collection methods help community associations realize higher returns and lower delinquency ratings at virtually no risk to the organization.

Axela is fully compliant with Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Telephone Consumer Protection Act (TCPA).

 

Get a Free Consultation with a
Collections Expert

Need a Better Cash Flow for Your Condo or HOA?

Your Collections process may be what’s holding your budget back. Let us help with this free analysis of your collections process.

Call Us
305-392-0389

 

 

 

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