Collapsed Florida Condo: President Sought $15 <illion Special Assessment in April

NPR, today:
Before a large portion of Champlain Towers South came smashing down, the building's condo board sent a letter to residents noting significant deterioration and explaining the need for a $15 million special assessment to be paid by members.

The [16-page] letter obtained by NPR, and first published in full by The Wall Street Journal, was sent before the condominium association's board meeting in April. It is signed by Jean Wodnicki, president of the board of directors of the condo association.

In the letter, Wodnicki said discussion of construction and the related expenses had stretched for months and years. "As this work has become so all-consuming for us, this summary could perhaps be called a report on the 'State of the Building,' " she wrote.

The memo outlined how engineer Frank Morabito was hired in 2018 to do an inspection of the building and provide an initial estimate in advance of its required 40-year inspection in 2021.

But since then, Wodnicki wrote, the cost of the work had increased as the building's condition had deteriorated significantly and visibly.

"Among other things, that estimate indicated that the concrete damage observed would begin to multiply exponentially over the years, and indeed the observable damage such as in the garage has gotten significantly worse since the initial inspection," Wodnicki wrote. "When you can visually see the concrete spalling (cracking), that means that the rebar holding it together is rusting and deteriorating beneath the surface."

And she warned that the scope of work had expanded since the initial 2018 report: "The concrete deterioration is accelerating. The roof situation got much worse, so extensive roof repairs had to be incorporated."

The cost for such extensive repairs appears to have been a cause for concern for owners of units in the building. Morabito's 2018 estimate for repairs had been $9.1 million, but that figure had risen to $15 million when the letter was written.

"For those who believe we are assessing too much, this shows that we are actually under-assessing a bit according to estimates," Wodnicki wrote. "For everyone, I acknowledge that we are talking about a huge project and a very large assessment. Your Board of Directors is working very hard to bring this project to fruition."

Wodnicki wrote that everything in her letter had already been presented, discussed and voted on.

"We have discussed, debated, and argued for years now, and will continue to do so for years to come as different items come into play." Read the full letter here:

[Go to https://www.npr.org/sections/live-updates-miami-area-condo-collapse/2021/06/29/1011280545/letter-from-condo-board-warned-buildings-damage-has-gotten-significantly-worse]

From the 16-page letter the Champlain Towers Board President wrote to Owners in April:

Reserves as of the January 2021 balance sheet are $777,435.22. Some of this money ($221,335.66) is segregated as an elective Reserve fund for our insurance deductible. This leaves $556,099.56 in statutory (required by law) Reserves. As it will be difficult or impossible to get another loan for some years after this bank loan closes, this Board feels it would be inappropriate to spend our Reserves for these projects [detailed earlier in the letter]. We need to conserve some cash in the event of an emergency. So, the total cash on hand for our projects is:

SA2020 $247,724.74

SA2019 $459,279.22

TOTAL CASH ON HAND $707,003.96

AugustinD comment:
I hope Ms. Wodnicki has the support of a shrink, rabbi or priest, and family.

They are all separate entities from each other. Not all built at same time. The North tower HOA has already been on top of things. Just read an article about those people deciding to stay. It appears the other tower had long standing issues. If read other articles correctly they were sued over this not long ago. The member won I believe. They were to start doing repairs on roof.

It is not too soon to discuss as well need to know how would our HOA react? Are we prepared? If not, then strike when it matters on people's minds

I saw an article that assessments varied by unit size, from $80k for a 1 bedroom to $300k for the penthouse. It's no surprise that with numbers like these there was probably tremendous pushback. It's unfortunate that none of the inspecting engineers recognized just how bad things were and how urgent the situation was.

The engineers DID recognize and DID write it up. They just did not put a "timeline" or "urgency" directly on it. That would be nearly impossible to discern. So it's not like this was something that "slipped through" the system without any warnings or notice. There was even a study made on this building! An inspector even noticed 36 hours BEFORE the collapse puddles of water in the garage and bad supports.

This is a good example of what happens when members/owners don't want to accept the truth and reality of action by raising assessments. We see it here ALL the time from certain posters. They want to "ankle bite" their management into basically inaction.

Building codes, inspections, permits, restrictions of use, and fines to correct are ALL part of the system to prevent such things from happening. It shows that sometimes even with the right tools in place, signs, and warnings a HOA can decision itself into inaction or late actions.

It sound like the other buildings in the complex are not managed by the same group. Atleast they sound like their HOA/COA was a bit more active than reactive. It's a change your culture situation which is the hardest to change.

I wish I could find the broadcast of the discussion CathyA3 cited. So far, no joy.

The web site the1a.org appears to be affiliated with NPR.

Chatter about the Board's dynamics in the last several years:

Myriam Caspi Notkin, 81, was a former treasurer of the Champlain Towers South Condominium Association. A Champlain Towers South survivor said she felt powerless towards the end of her tenure as treasurer from 2014 to 2019.

“She said, ‘I am finished. I cannot fight. They don’t hear me. They don’t listen to me. Enough is enough! This is the end of it!’ They made her life miserable,” said the resident, who did not want to be identified over a fear of reprisal. “There was fighting constantly.”

Notkin, 81, was worried about the effects of the dysfunctional dynamic. A troublesome 2018 report shows an engineer warned the board there was major structural damage. She sent an e-mail to the board in 2019 calling them to action: “Doesn’t it bother you to see this building what it has become?”

Notkin was not alone. There was instability in Champlain Towers South Condominium Association’s leadership. In the past five years, the condominium association had five presidents and vice presidents, state records show.

John Pistorino, an engineer with Pistorino & Alam Consulting in South Miami, helped to write the recertification requirement in 1974. The veteran structural engineer said the maintenance should have been ongoing since 1981 when the building was built.

“You don’t wait 40 years to do your building. The code requires you to maintain the building as you go. Every year, you need to scrutinize the building, anything that is coming up needs to be done,” Pistorino said. “You don’t wait for 40 years.”

Notkin, 81, and her husband, Arnold “Arnie” Notkin, 87, are among the more than 150 people who remained unaccounted for...

More at https://www.local10.com/news/local/2021/06/29/woman-worried-about-condo-associations-dysfunctional-dynamic-remains-missing-after-collapse-in-surfside/

From https://www.npr.org/sections/live-updates-miami-area-condo-collapse:
At least three lawsuits have been filed. One of the attorneys is seeking consolidation of all the lawsuits, with him as lead attorney. "At the heart of these recent complaints is the assertion that the condo association should've known about the structural issues with the building and didn't act quickly to ensure those problems were fixed."

AugustinD comment:
Will there be some financial "justice" awarded to the victims' estates and the victims' families? On all the levels that might count, I expect not.

Could the condo corporation assess all the membership to pay --- what, all the membership, for all their losses? Mathematically I see no logic here.

The COA may bankrupt. The insurance coverage may not be nearly enough. The deepest pockets by far are the insurers'. The attorneys will take their guaranteed cut, and it will be huge. The hearts of families are torn apart. The families are signing up as plaintiffs, in I know immeasurable pain from their losses.

But on the practical side of re-compense, the math looks very much against all the owners and tenants at Champlain Towers South. To me, the pursuit of money via lawsuits here, where the lawsuits blame the COA and so the Board, is almost entirely about attorneys' greed.

I expect no one is surprised. It's always been this way. We buy insurance to support the attorney-industrial complex (a cousin of the military-industrial complex).

As MelissaP1 and others have pointed out, the lessons here to other condo boards seem clear enough: Year after year, the Board must listen to the professionals.

And yet: How do the directors insure they are re-elected so that they can get the job done, especially when they just imposed a massive assessment on owners who simply do not understand that the building is in disrepair and the assessment is desperately needed? No way will a board ever be effective at persuading all members of the need to increase the assessment or impose a large special assessment.

I am back to BillH10's suggestion about legislatures stepping in. How about statutory requirements for reserve funding? How about statutes giving reserve study companies more power to, say, report boards to some government agency when the boards are clearly blowing off infrastructure needs? Re the government agencies: Ugh. But I have no better ideas right now.

I agree - in the end, I don't see anyone getting any money beyond what their individual policies may cover- and then I can see those companies doing everything to weasel out of THAT.

Legislation may help somewhat, but you can't legislate common sense and fiscal prudence. Sadly, there are people living in HOA communities who look at this and think it'll NEVER happen to them - until it does. Then we see the posts on this website about the board not doing X, the property manager not doing Y, and the attorneys all getting paid as everyone shes whoever has the deep pockets.

Its probably too soon but i have to wonder about the domino effect. Will we see insurance companies cancel master HOA policies by the dozens after this. Perhaps they can make reserve studies a requirement for buying and keeping the policy, but what if you're having a devil of a time paying for anything because of delinquencies? Will reserve specialists tell people the truth or speak in tongues - not because of the Holy Ghost, but because they want to scare people into paying for lots and lots of things the community really doesn't need, but the board is too frightened to do something else because the homeowners will whine about that.

Will anyone want to serve on a HOA iard after this? It doesn't have to be a high rise in Florida- it could happen to a townhouse community in California that's hit by an earthquake or one in the Midwest hit by a bad tornado.

I don't think presenting a proposal for a $100K special assessment gets anyone off the hook (not that I'm placing blame on anyone).

Obviously there can be unforeseen circumstances but, generally speaking, special assessments are a sign of mismanagement.

I also it's too simplistic to say special assessment = mismanagement. There can be many reasons for them:

* incompetent management of finances, which can include failure to set aside enough money for reserves or emergency spending

* a board that's unwilling to deal with pushback from owners

* a board that's willing to deal with pushback but gets replaced by a more docile board the minute they try

* a board that must get homeowner approval for annual budgets and/or assessment levels over a certain amount (a.k.a. Cathy's License to Commit Financial Suicide) - and the proposed budgets/assessment increases get voted down regularly

* unforeseen circumstances, which can include accelerated wear-and-tear due to increasing numbers of extreme weather events or the discovery of construction defects (sounds like both of these may be involved in the condo collapse)

* changes in laws that can result in increased spending for administrative and similar expenses (since Florida is one of the more heavily regulated states, I'd expect more of this sort of thing than I see elsewhere)

* changes in economic circumstances that can drive costs up - eg. inflation in the cost of building materials due to hot real estate markets in other parts of the country, tariffs on lumber, etc. etc.

As with the physical causes of the collapse, I expect we'll find several of the above contributing to the need for a special assessment needed at Surfside.

According to this article the association had 5 presidents and 5 vps in the last 5 years, it is not clear if the director turnover is that high or just officers switching around.
https://www.local10.com/news/local/2021/06/29/woman-worried-about-condo-associations-dysfunctional-dynamic-remains-missing-after-collapse-in-surfside/

This article also suggests that a woman who served as treasurer for several years tried to get the board to take action on maintenance.

I also found their corp page at sunbiz, I don't have time right now to compare this year and past years reports to see how much board turnover there was but a quick glance shows some at least:
http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directiInitial&searchNameOrder=CHAMPLAINTOWERSSOUTHCONDOMINIU%207580340&aggregateId=domnp-758034-03e5d51f-275a-43af-a19f-d1404db04ece&searchTerm=champlain%20tower&listNameOrder=CHAMPLAINTOWERSEASTCONDOMINIUM%20N940000047320

I haven't found anything yet that suggests that board or officer turnover was related to proposed large assessments, but it's possible members were voting out directors who wanted to impose them.

As a board member who recognized the severity of the issue, if the other members didn't support going ahead, I wouldn't blame anyone for resigning. If the member's voted them out, then it would have taken time for the new member's to review the reports.

My experience with being on an HOA Board is it's like herding feral cats. I'm referring to the Board members, not the membership. Membership may always think that a newly elected Board is better when the previous Board because they were saying things the member's didn't want to hear.

This morning rescue operations were paused due to fears that the remainder of the building will also collapse.

https://www.washingtonpost.com/nation/2021/07/01/florida-condo-building-collapse-live-updates/

I certainly wouldn't blame most recent board members for the situation. I have read that most of the board in place at the time of the 2018 inspection tried to do what needed to be done but there was so much pushback from members and some directors that many of them just gave up and quit. Depending on what is found after everything is dug out, it might turn out that doing major work even three years ago was too late to save the building.

I think the more important thing is to learn from this.

Just my observation. one would have to go back 10-30 years ago to those board members that ignored or blew off any needed repairs. I honestly don't know what the inspection schedule is for condos of if there is one, but I'm willing to bet that the powers that be are scrambling to make sure this don't happen again.

Here's a link to a story on NPR that lists ways people can help the survivors, with links - if folks are getting impatient with "Monday Morning Quarterbacking," this is a real and practical way to do something useful in the meantime:

https://www.npr.org/sections/live-updates-miami-area-condo-collapse/2021/06/26/1010457993/after-florida-condo-disaster-state-lists-ways-to-help-victims

Jack,
I think your comment is based on many misconceptions.

1) If someone told you to evacuate your high rise Condo would you do it?
2) They may have know the building had issues but no one knew what would happen.
3) These problems go back years. I doubt anyone who have given them data saying the building would fall the last week in June.
4) Knowing they have a problem and having the money to fix it are 2 completely different things.
5) If your HOA told you they were going to assess you nearly 100k are you ready to wright that check? If your answer is good congrats but most people can't.

I am sure that the surviving board members and also every owner in the building wishes they could turn the clock back. They will live with those issues for the rest of their lives. The last thing we need to do is blame them.

Someone holds the responsibility for either knowingly allowing the building to be occupied in a state of decay, or not asking professionals to inspect the building to tell the board what the state of the building was. That someone is the board of directors of the condo owners association. Perhaps it is the management company depending on how they structure their work. (In our HOA it would be the the board, but maybe their condo association has given the property manager a lot of responsibility.)

The arguments about the owners not wanting to pay 100k+ is a red herring. It would cost the owners nothing to evacuate the building, which is the decision that should have been made. The cost to hire engineers to ascertain the structural integrity is relatively cheap and could be done without special assessments.

I would suppose that the Board would coordinate with the code enforcement entity of the city/county where it is located, and the two entities would work together to revoke the certificate of occupancy. Then the police/fire/code enforcement professionals would remove anyone not voluntarily leaving on their own.

Glad to see I am not alone on this last few suggestions. Not sure how many Condo COAs they have along the coast in Florida that are this age or older. They will all get looked at much closer now and many will pay for this extra measures.

Something else that bugged me a few posts back was that the Reserve Study people should have done more and shut this building down. RS annalists do not do anything close to this type of work. They only wright a report and send glossy pictures and predict when things could fail. It is not a science and is only an opinion. Experts need to be hired by boards and specific opinions given on this type of major failures. I doubt any of the experts would have said this would happen June/2021.

The Florida Condo Act places no limit on the size of Special Assessments. I think many of the HOA/COA-director veterans here would have voted for a massive special assessment back in 2018, along with arranging a loan. (I understand the Champlain South Board was in fact arranging for both a loan along with imposing a Special Assessment.)

It appears to me that FS 718.112 (2) (f) 2. b allows members to call a Special Meeting to "waive or reduce" reserves.

I have both stood my ground (and got voted down) on a significant repair that the HOA manager insisted need not be done per code (as described in the Reserve Study) and succumbed to pressure to do a less expensive repair (which within a year, failed, resulting in significant damage to property).

Thank you for the link to the WaPo article (Majority of Florida Condo Board Quit... )

Your post must have crossed the desks of a number of insurance companies. See, "Insurers are making demands of 40-year-old buildings after Surfside condo collapse,"
https://www.miamiherald.com/news/local/community/miami-dade/miami-beach/article252528138.html. Excerpt:
"Within days of the partial collapse of Champlain Towers South in Surfside, insurance companies sent letters to owners of condominiums 40 years and older in South Florida, asking for proof that their buildings have passed all inspections, or they will lose their coverage.

The deadly collapse of the 136-unit high rise has spooked an industry that had already considered older condos on the coast — with their hurricane exposure, their common ownership structure and reputation for delaying maintenance — a high risk, experts say.

Now, if a building can’t comply with the insurance requests, the insurer can cancel the policy with a 45-day notice, or choose not to renew the policy, said Isidro “Izzy” Guillama, CEO of ProCom Insurance Underwriters, a Miami-based independent insurance agent who specializes in condo insurance."

Sadly AugustinD, I feel what will eventually happen to Condo COA in regards to insurance is what happened with insurance carriers that stopped offering hurricane coverage in Florida. Now residents need to buy hurricane coverage from the state kinda like homeowners purchase flood insurance from Uncle Sam.

Melissa,
Wow that is a very through video that explains a lot. So sad to see this stuff come out.

I watched a few other videos but were not as good as that one. It was logical and made sense. Plus think the guy must be a local as watched a few of his "live" reports from the direct scene. Which there is a link to them at the end of that video. Very interesting and scary.

It does seem like many of the "Youtube Engineers" are all showing the same failure point at the pool deck area. With everyone here in a tizzy about opening their pools etc... May want to take a moment to view this video. There are signs should be looking for before deciding to open. That pool guy was very lucky who was there only 36 hours from the collapse.

... and what's all this bs in the last several days setting the threshold for cracking down on COAs only when the 40-year point is reached? Clearly forty years is the wrong 'magic number.' As at least one engineer, attorney, planner yada pointed out in recent days, maintenance should be happening every year.

I suppose Florida cities are prioritizing the older buildings right now, as resources are limited.

I think like every board veteran here who read about the bickering on the board of the South Champlain Towers had a flashback to the bickering on their own boards when it came to repairs and reserve funding. I think it certainly makes a case for a receiver-like situation to be imposed on every condo with reserve funding below say 90%.