Senate Bill sb0396

CODING: Words stricken are deletions; words underlined are additions.
    Florida Senate - 2007                                   SB 396

    By Senator Margolis





    35-348A-07

  1                      A bill to be entitled

  2         An act relating to the conversion of existing

  3         improvements to condominium ownership; amending

  4         s. 718.616, F.S.; requiring that certain

  5         disclosures be compiled in a report; revising

  6         the items required to be disclosed; requiring

  7         supplemental reports in certain situations;

  8         amending s. 718.618, F.S.; revising certain

  9         requirements for reserve accounts; revising the

10         method of computing the amounts required to

11         fund additional converter reserve accounts;

12         deleting references to specific items that are

13         covered by an implied warranty of fitness in

14         the absence of reserve accounts; requiring that

15         a developer disclose in a contract of sale

16         compliance with certain obligations regarding

17         the maintenance of improvements; providing an

18         effective date.

19  

20  Be It Enacted by the Legislature of the State of Florida:

21  

22         Section 1.  Section 718.616, Florida Statutes, is

23  amended to read:

24         718.616  Disclosure of condition of building and

25  estimated replacement costs and notification of

26  municipalities.--

27         (1)  Each developer of a residential condominium

28  created by converting existing, previously occupied

29  improvements to such form of ownership shall prepare a report

30  that discloses disclose the condition of the improvements and

31  

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  the condition of certain components and their current

 2  estimated replacement costs as of the date of the report.

 3         (2)  The following information shall be stated

 4  concerning the improvements:

 5         (a)  The date and type of construction.

 6         (b)  The prior use.

 7         (c)  Whether there is termite damage or infestation and

 8  whether the termite damage or infestation, if any, has been

 9  properly treated.  The statement shall be substantiated by

10  including, as an exhibit, an inspection report by a certified

11  pest control operator.

12         (3)(a)  Disclosure of condition shall be made for each

13  of the following components that the existing improvements may

14  include:

15         1.  Roof.

16         2.  Structure.

17         3.  Fireproofing and Fire protection systems.

18         4.  Elevators.

19         5.  Heating and cooling systems.

20         6.  Plumbing.

21         7.  Electrical systems.

22         8.  Swimming pool.

23         9.  Seawalls, pilings, and docks.

24         10.  Pavement and concrete, including roadways,

25  walkways, and parking areas.

26         11.  Drainage systems.

27         12.  Irrigation systems.

28         (b)  For each component, the following information

29  shall be disclosed and substantiated by attaching a copy of a

30  certificate under seal of an architect or engineer authorized

31  to practice in this state:

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1         1.  The age of the component as of the date of the

 2  report.

 3         2.  The estimated remaining useful life of the

 4  component as of the date of the report.

 5         3.  The estimated current replacement cost of the

 6  component as of the date of the report, expressed:

 7         a.  As a total amount; and

 8         b.  As a per-unit amount, based upon each unit's

 9  proportional share of the common expenses.

10         4.  The structural and functional soundness of the

11  component.

12         (c)  Each unit owner and the association are

13  third-party beneficiaries of the report.

14         (d)  A supplemental report shall be prepared for any

15  structure or component that is renovated or repaired after

16  completion of the original report and prior to the recording

17  of the declaration of condominium. If the declaration is not

18  recorded within 1 year after the date of the original report,

19  the developer shall update the report annually prior to

20  recording the declaration of condominium.

21         (e)  The report may not contain representations on

22  behalf of the development concerning future improvements or

23  repairs and must be limited to the current condition of the

24  improvements.

25         (4)  If the proposed condominium is situated within a

26  municipality, the disclosure shall include a letter from the

27  municipality acknowledging that the municipality has been

28  notified of the proposed creation of a residential condominium

29  by conversion of existing, previously occupied improvements

30  and, in any county, as defined in s. 125.011(1), acknowledging

31  

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  compliance with applicable zoning requirements as determined

 2  by the municipality.

 3         Section 2.  Section 718.618, Florida Statutes, is

 4  amended to read:

 5         718.618  Converter reserve accounts; warranties.--

 6         (1)  When existing improvements are converted to

 7  ownership as a residential condominium, the developer shall

 8  establish reserve accounts for capital expenditures and

 9  deferred maintenance, or give warranties as provided by

10  subsection (6), or post a surety bond as provided by

11  subsection (7). The developer shall fund the reserve accounts

12  in amounts calculated as follows:

13         (a)1.  When the existing improvements include an

14  air-conditioning system serving more than one unit or property

15  which the association is responsible to repair, maintain, or

16  replace, the developer shall fund an air-conditioning reserve

17  account. The amount of the reserve account shall be the

18  product of the estimated current replacement cost of the

19  system, as disclosed and substantiated pursuant to s.

20  718.616(3)(b), multiplied by a fraction, the numerator of

21  which shall be the lesser of the age of the system in years or

22  9, and the denominator of which shall be 10. When such

23  air-conditioning system is within 1,000 yards of the seacoast,

24  the numerator shall be the lesser of the age of the system in

25  years or 3, and the denominator shall be 4.

26         2.  The developer shall fund a plumbing reserve

27  account. The amount of the funding shall be the product of the

28  estimated current replacement cost of the plumbing component,

29  as disclosed and substantiated pursuant to s. 718.616(3)(b),

30  multiplied by a fraction, the numerator of which shall be the

31  

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  lesser of the age of the plumbing in years or 36, and the

 2  denominator of which shall be 40.

 3         3.  The developer shall fund a roof reserve account.

 4  The amount of the funding shall be the product of the

 5  estimated current replacement cost of the roofing component,

 6  as disclosed and substantiated pursuant to s. 718.616(3)(b),

 7  multiplied by a fraction, the numerator of which shall be the

 8  lesser of the age of the roof in years or the numerator listed

 9  in the following table. The denominator of the fraction shall

10  be determined based on the roof type, as follows:

11  

12      Roof Type                  Numerator   Denominator

13      

14  a.  Built-up roof

15      without insulation             4            5

16  b.  Built-up roof

17      with insulation                4            5

18  c.  Cement tile roof              45           50

19  d.  Asphalt shingle roof          14           15

20  e.  Copper roof

21  f.  Wood shingle roof              9           10

22  g.  All other types               18           20

23  

24         (b)  The age of any component or structure for which

25  the developer is required to fund a reserve account shall be

26  measured in years, rounded to the nearest whole year. The

27  amount of converter reserves to be funded by the developer for

28  each structure or component shall be based on the age of the

29  structure or component as disclosed in the inspection report.

30  The architect or engineer shall determine the age of the

31  component from the later of:

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1         1.  The date when the component or structure was

 2  replaced or substantially renewed, if the replacement or

 3  renewal of the component at least met the requirements of the

 4  then-applicable building code; or

 5         2.  The date when the installation or construction of

 6  the existing component or structure was completed.

 7         (c)  When the age of a component or structure is to be

 8  measured from the date of replacement or renewal, the

 9  developer shall provide the division with a certificate, under

10  the seal of an architect or engineer authorized to practice in

11  this state, verifying:

12         1.  The date of the replacement or renewal; and

13         2.  That the replacement or renewal at least met the

14  requirements of the then-applicable building code.

15         (d)  In addition to establishing the reserve accounts

16  specified above, the developer shall establish those other

17  reserve accounts required by s. 718.112(2)(f), and shall fund

18  those accounts in accordance with the formula provided

19  therein. The vote to waive or reduce the funding or reserves

20  required by s. 718.112(2)(f) does not affect or negate the

21  obligations arising under this section.

22         (2)(a)  The developer shall fund the reserve account

23  required by subsection (1), on a pro rata basis upon the sale

24  of each unit. The developer shall deposit in the reserve

25  account not less than a percentage of the total amount to be

26  deposited in the reserve account equal to the percentage of

27  ownership of the common elements allocable to the unit sold.

28  When a developer deposits amounts in excess of the minimum

29  reserve account funding, later deposits may be reduced to the

30  extent of the excess funding. For the purposes of this

31  subsection, a unit is considered sold when a fee interest in

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  the unit is transferred to a third party or the unit is leased

 2  for a period in excess of 5 years.

 3         (b)  When an association makes an expenditure of

 4  reserve account funds before the developer has sold all units,

 5  the developer shall make a deposit in the reserve account.

 6  Such deposit shall be at least equal to that portion of the

 7  expenditure which would be charged against the reserve account

 8  deposit that would have been made for any such unit had the

 9  unit been sold. Such deposit may be reduced to the extent the

10  developer has funded the reserve account in excess of the

11  minimum reserve account funding required by this subsection.

12  This paragraph applies only when the developer has funded

13  reserve accounts as provided by paragraph (a).

14         (3)  The use of reserve account funds is limited as

15  follows:

16         (a)  Reserve account funds may be spent prior to the

17  assumption of control of the association by unit owners other

18  than the developer; and

19         (b)  Reserve account funds may be expended only for

20  repair or replacement of the specific components for which the

21  funds were deposited, unless, after assumption of control of

22  the association by unit owners other than the developer, it is

23  determined by three-fourths of the voting interests in the

24  condominium to expend the funds for other purposes.

25         (4)  The developer shall establish the reserve account

26  in the name of the association at a bank, savings and loan

27  association, or trust company located in this state.

28         (5)  A developer may establish and fund additional

29  converter reserve accounts. The amount of funding shall be the

30  product of the estimated current replacement cost of a

31  component, as disclosed and substantiated pursuant to s.

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  718.616(3)(b), multiplied by a  fraction, the numerator of

 2  which is the age of the component in years and the denominator

 3  of which is the total estimated life of the component in

 4  years.

 5         (6)  A developer makes no implied warranties when

 6  existing improvements are converted to ownership as a

 7  residential condominium and reserve accounts are funded in

 8  accordance with this section. As an alternative to

 9  establishing such reserve accounts, or when a developer fails

10  to establish the reserve accounts in accordance with this

11  section, the developer shall be deemed to have granted to the

12  purchaser of each unit an implied warranty of fitness and

13  merchantability for the purposes or uses intended, as to the

14  roof and structural components of the improvements; as to

15  fireproofing and fire protection systems; and as to

16  mechanical, electrical, and plumbing elements serving the

17  improvements, except mechanical elements serving only one

18  unit. The warranty shall be for a period beginning with the

19  notice of intended conversion and continuing for 3 years

20  thereafter, or the recording of the declaration to condominium

21  and continuing for 3 years thereafter, or 1 year after owners

22  other than the developer obtain control of the association,

23  whichever occurs last, but in no event more than 5 years.

24         (a)  The warranty provided for in this section is

25  conditioned upon routine maintenance being performed, unless

26  the maintenance is an obligation of the developer or a

27  developer-controlled association.

28         (b)  The warranty shall inure to the benefit of each

29  owner and successor owner.

30         (c)  Existing improvements converted to residential

31  condominium may be covered by an insured warranty program

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  underwritten by an insurance company authorized to do business

 2  in this state, if such warranty program meets the minimum

 3  requirements of this chapter. To the degree that the warranty

 4  program does not meet the minimum requirements of this

 5  chapter, such requirements shall apply.

 6         (7)  When a developer desires to post a surety bond,

 7  the developer shall, after notification to the buyer, acquire

 8  a surety bond issued by a company licensed to do business in

 9  this state, if such a bond is readily available in the open

10  market, in an amount which would be equal to the total amount

11  of all reserve accounts required under subsection (1), payable

12  to the association.

13         (8)  The amended provisions of this section do not

14  affect a conversion of existing improvements when a developer

15  has filed a notice of intended conversion and the documents

16  required by s. 718.503 or s. 718.504, as applicable, with the

17  division prior to the effective date of this law, provided:

18         (a)  The documents are proper for filing purposes.

19         (b)  The developer, not later than 6 months after such

20  filing:

21         1.  Records a declaration for such filing in accordance

22  with part I.

23         2.  Gives a notice of intended conversion.

24         (9)  This section applies only to the conversion of

25  existing improvements where construction of the improvement

26  was commenced and occupied prior to its designation by the

27  developer as a condominium. In such circumstances, s. 718.203

28  does not apply.

29         (10)  A developer who sells a condominium parcel that

30  is subject to this part shall disclose in conspicuous type in

31  the contract of sale whether the developer has established

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida Senate - 2007                                   SB 396
    35-348A-07




 1  reserve accounts, provided a warranty of fitness and

 2  merchantability, or posted a surety bond for purposes of

 3  complying with this section.

 4         Section 3.  This act shall take effect July 1, 2007.

 5  

 6            *****************************************

 7                          SENATE SUMMARY

 8    Revises provisions related to requirements for reserve
      accounts when an existing improvement is converted to
 9    condominium ownership. Requires that certain disclosure
      be compiled in a report. Revises the items to be
10    specified in the report. Requires supplemental reports in
      certain situations. Revises reserve account requirements.
11    Revises the method used to compute requirements for
      reserve accounts and additional converter reserve
12    accounts. Deletes references to specific items that are
      covered by an implied warranty of fitness. (See bill for
13    details.)

14  

15  

16  

17  

18  

19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

                                  10

CODING: Words stricken are deletions; words underlined are additions.