This is a difficult subject, and I’ve waited to address it for time to pass since the tragic June 24 collapse of the 136-unit Champlain Towers South condo project in Surfside, Florida.
South Carolina has many aging condominium projects, particularly along our coast. And we have an earthquake fault line to consider. Do our local homeowners’ association boards face expensive repair and reserve dangers similar to those in Florida?
Dale Whitman, the esteemed retired professor from the University of Missouri School of Law who moderates the national Dirt Real Estate Lawyers Listserv (Dirt@listserv.umkc.edu) has commented on Florida’s concerns in this regard. (If you’re not already following this listserv, I highly recommend it for all South Carolina dirt lawyers.)
The legal news following the collapse is that the Florida Bar has appointed a committee to review existing Florida legislation and to make recommendations for changes. Apparently, Florida law requiring reserve studies is weak and can be waived by a majority of the unit owners. To my knowledge, South Carolina has no such legislation.
It was estimated that nearly $17 million would have been needed to make the necessary repairs to the building that collapsed, but that available reserves amounted to only $770,000. Massive special assessments (more than $300,000 per unit) would have been needed. Collection was ongoing at the time of the collapse. But many unit owners simply did not have access to funds in that amount.
Professor Whitman wrote in the listserve on July 8:
“A much more robust program of reserves would have been needed to avoid this problem. But how much? The need for a large expenditure to shore up the building’s structure is inherently unpredictable; it isn’t like a roof with a 20-year life, for example. But some sort of prediction is nonetheless necessary. Pick a number: say, a goal of achieving a reserve of 20% of the building’s original capital cost over the first 20 years of the building’s life, with continuing growth at the same rate thereafter. That would mean that the original assessments would be considerably higher than they would be with a more modest, conventional reserve program. It would add to the residents’ monthly cost and would make ‘affordable housing’ harder to achieve. But isn’t that better than a catastrophic collapse?”
He also speculated that periodic structural inspections by qualified engineers may be necessary. The building that collapsed apparently had such an inspection in 2018. That inspection revealed structural problems that could have been repaired for $9 million.
A couple of Florida Counties require aging high-rises to go through inspections after they reach 40 years of age. Failing the inspections can result in the loss of certificates of occupancy. But there is no similar state-wide requirement in Florida or South Carolina.
Much more stringent building inspection and condominium law requirements may be needed in South Carolina. I believe our HOA legislative scheme provides only the bare bones necessary to create and maintain a horizontal property regime. And I am not aware of any state-wide legislation that requires periodic inspections of high-rise buildings.
We should watch to see what Florida does and consider making similar changes. These issues are difficult to legislate and enforce but preventing comparable tragedies in South Carolina must be worth the effort.