Lessons from Florida's Tragedy
The recent collapse of a condominium building in Surfside, Florida resulting in the loss of so many lives is a tragedy.
Below we link to an article from the New York Times recounting the years of deferred decision making and difficult conversations prior to the collapse of a portion of the building and the demolition of the remainder. You can see that the board at the Surfside condominium faced ongoing problems with petitions asking for maintenance and repairs to be deferred because of the costs. This led to in-fighting, director resignations and vital repairs being delayed for too long.
In Ontario, the mandated Reserve Fund study every three years and corresponding obligation to fund, the auditor’s obligation to report on compliance in the audited financial statements and the disclosure of Reserve Fund in Periodic Information Certificates and Status Certificates should offer significant protection to Ontario condominium owners. However, the system is not perfect.
Our legislation is designed to ensure proper funding of Reserve Funds. Unlike in Florida, owners in Ontario do not have the right to vote not to fund a Reserve Fund. Instead, commissioning Reserve Fund studies, ensuring adequate contributions and spending on common element maintenance repairs are some of the board’s primary obligations – and rest almost entirely within their discretion.
Our legislation also ensures that necessary monies can be collected. In Ontario, unpaid common expenses and assessments are subject to a right of lien in favour of the condominium. The lien ranks ahead of any other mortgage or debt. The ability to collect monies without going to court and collecting on a judgment, as required in the United States, gives Ontario condominiums an enormous advantage.
Ontario condominium owners do not have a say in the contribution levels or the completion of the work deemed to be necessary by professional engineers or other qualified Reserve Fund planners. Owners' only recourse when there is disagreement relating to maintenance and repairs is to remove board members, which the Condominium Act makes understandably difficult to achieve. If a board of directors has done its work and calls a meeting of owners at which the engineer is in attendance to explain what repairs are required and why, owners almost always respond positively to the board’s plans.
There are times when even the most carefully planned and monitored Reserve Funds will not be adequate for a variety of reasons, including unforeseen construction cost increases or unexpected repairs that become necessary ahead of schedule. Though this may be frustrating for owners, if the engineering advice is to proceed with certain work, then the board would not be acting responsibly if repairs were deferred. A special assessment or borrowing may be required to adequately fund the repairs. Owners should keep in mind that the board members also pay those amounts.
Even though it may be politically tempting to defer necessary work, carry out cosmetic work instead or reduce Reserve Fund contributions below recommended levels, this must be avoided. Not only does this present a life safety risk, but under-contribution to the Reserve Fund has a snowball effect due to lost interest that may later prove financially ruinous.
Thankfully, most boards we encounter make good faith best efforts to maintain an adequate Reserve Fund and to prioritize work responsibly. This includes consulting legal counsel for advice if there is any question of whether an expenditure can be made from the Reserve Fund.
The Surfside tragedy offers a stark lesson for condominium boards and owners. Board members who fail to deal responsibly with reserve funding and repairs leave themselves exposed to liability. Owners must think very seriously about whether it is wise to seek the removal of board members, or otherwise interfere with board decisions, just because those owners do not want to face increased costs or deal with the hassle of living through a major project. Owners ought to remember that boards rely on expert, professional advice from engineers, lawyers, property managers, and accountants when making these decisions.
We hope that condominium boards and owners in Ontario and beyond will learn from this awful tragedy in Florida and will act reasonably when it comes to the maintenance and repair of their buildings.
New York Times: Inside the Tumultuous Years Before the Florida Condo Collapse
https://www.nytimes.com/2021/07/03/us/miami-florida-surfside-collapse.html?referringSource=articleShare