New Laws that Impact Florida Residents Living in an HOA
The Florida Legislature reconvened for a 5-day special session on May 23, 2022, resulting in comprehensive condominium safety and property insurance reforms. Senate Bill (SB) 4D, a building inspection mandate prompted by the June 2021 collapse of Champlain Towers South in Surfside, and Senate Bill (SB) 2D, aimed at property insurance reform, became law on May 26, 2022.
Senate Bill (SB) 4D
SB 4D, Florida's new building safety law, requires condominium and cooperative associations to conduct milestone building inspections and maintain cash reserves for structural maintenance and repairs. Boards that manage buildings three stories and taller have until the end of 2024 to perform structural assessments to determine current and future maintenance and repair needs. The HOA board will decide the amount of money needed to cover the cost of repairs based on the age of the building, its condition, and cash reserves. In addition, condo and cooperative associations will no longer be able to waive or reduce the cash reserve requirements for structural building integrity components.
The following provisions are included in SB 4D:
Condo and cooperative buildings at least three stories tall within three miles of the coast will have to be inspected when the buildings reach 25 years of age. Structures more than three miles inland would require inspections at 30 years. Each of these associations will need to conduct inspections every ten years after that. The initial inspection (called Phase 1 inspection) will include a visual examination and assessment of the building's structural conditions in habitable and uninhabitable areas. If the architect or engineer finds signs of substantial structural deterioration to any building components under visual examination, the association must arrange for a more thorough inspection (called a Phase 2 inspection) to be conducted.
The association must complete a mandatory reserve study for structural integrity components (building, floors, windows, plumbing, electrical, etc.) by December 31, 2024.
On December 31, 2024, boards can no longer opt out of funding reserves for structural integrity components.
Suppose a milestone inspection is required, and the building's certificate of occupancy was issued on or before July 1, 1992. In that case, the HOA board must have the building's initial milestone inspection done before December 31, 2024.
Senate Bill (SB) 2D
SB 2D enacts measures to help alleviate rising insurance costs, increase insurance claim transparency and deter frivolous lawsuits which drive up prices. Many reforms passed as part of SB 2D aim to lower litigation costs and exposure for insurance carriers so that premium reductions can occur and generate a more robust market. Further, carriers willing to expand their business in Florida may create better market conditions for consumers.
In his special session proclamation, Governor DeSantis cited industry statistics that show Florida, which only generates 9% of property insurance claims, generates 79% of the nation's homeowner insurance lawsuits.
Below is an overview of the new insurance legislation covered under SB2D:
New Reinsurance Program
The Reinsurance to Assist Policyholders fund, or RAP fund authorized by SB 2D, allows insurers to obtain reimbursement for hurricane losses earlier than they normally would under the Florida Hurricane Catastrophe Fund. In addition, $2 billion of state general revenue funding is provided for this program. Insurers participating in the program in 2022 had to have reduced their policyholders' rates by June 30, 2022.
Insurers may not refuse to write or renew policies on homes with roofs less than 15 years old solely because of the roof's age.
Suppose a roof is at least 15 years old. In that case, insurers must allow homeowners to have a roof inspection before requiring the roof to be replaced as a condition for writing or renewing a homeowner's insurance policy. If an examination shows that the roof has five years or more of useful life, an insurer cannot refuse to write or renew a homeowner's insurance policy based solely on the roof's age. A method for calculating a roof's age for the aforementioned purposes is included in the bill.
A roof deductible provision is required, should be unambiguous, and allow the policyholder to opt-out of the separate roof deductible.
Property insurers may require a separate roof deductible with an opt-out provision. Policyholders who select a roof deductible must receive a premium credit or discount. The roof deductible may not apply to total losses caused by a covered peril, hurricane losses, and other circumstances. It also requires certain disclosures and allows an insurer to limit payment on a roof claim to actual cash value until the policyholder pays the roof deductible.
Roofs that are more than 25% damaged but comply with the 2007 Florida Building Code may be repaired instead of replaced.
Written contractors' solicitations encouraging consumers to make property insurance claims for roof damage are prohibited unless the solicitation contains specific consumer notices.
Insurance and Fraud Abuse
The new law creates a new insurer stability unit within the Office of Insurance Regulation to increase regulatory oversight.
The bill directs the Office of Insurance Regulation to publish information detailing the number of policies, amount of premium, number of cancellations, and other data for each property insurer statewide.
Home Hardening Grants
$150 million will be appropriated to provide hurricane mitigation inspections and matching grants to help Floridians afford home hardening improvements to their homestead single-family residences valued at $500,000 or less.