Senate Bill sb0396
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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:
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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
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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:
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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
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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
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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:
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12 Roof Type Numerator Denominator
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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
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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:
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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
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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.
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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
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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
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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.
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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.)
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