This year, hurricanes, with record rain, storm surges and winds, have resulted in severe damage to both commercial and residential buildings, mold contamination, and significant interruption to businesses in the impacted areas. Several Caribbean islands have been wiped away, Key West is unrecognizable, and Houston may have lost more than 150,000 homes. For most of us, luckily, the damage was less severe. My wife and I have leaks in our roof and elsewhere and lost a window (but gained an indoor tree). We lost power for about four and a half days. Friends in South Miami are still without power as of the writing of this post.

The legal implications of the hurricane aftermath extend well beyond mere rebuilding. Mold contamination and water intrusion must be addressed and properly remediated. Design and construction defects may be alleged to have exacerbated the extent of the damage from the hurricane. Employers may face workers’ compensation claims from employees and also may have vacation and lost wages concerns. Insurance coverage may be at issue. Construction costs may have escalated causing losses to builders or developers. Building permits and development approvals may expire due to delays caused by the hurricane. Condominium associations may not have sufficient reserves to act on emergency repairs. Construction licensing regulations may affect the ability to commence repairs and provide penalties for failure to engage properly certified contractors.

So what to do?

  • Make sure you and your family, employees and customers will be safe in your home or building.
    • Are there electrical system damage and risks?
    • Is the water safe to drink?
    • Is there a risk to the structural integrity of improvements?
    • Other Physical Hazards (don’t panic, but snakes and scorpions like piles of debris).
    • Contamination? Such as leaking petroleum tanks, chemical spills and the like.
  • Address potential health risks, whether mold or risky property conditions.
  • Secure your property and protect it from potential or further loss of property value.
  • Deal with Insurance.
  • Deal with Government Agencies such as FEMA
  • Deal with FP&L’s reimbursement programs.
  • Check with your mortgage lender. The lender may have the right to collect insurance proceeds and disburse the funds as repair and rebuilding proceed.
  • Only then commence to restore your property. Use only licensed and insured contractors. Where required by law, obtain all necessary permits and approvals. If you are part of a condominium or property owners’ association, make sure all Board approvals are obtained.
  • Get on with your life

Our lawyers have assisted clients in resolving insurance disputes, negotiating agreements in connection with assessment and remediation services, resolving design and construction defect claims,  implementing programs for addressing employee benefits, preparing hurricane and disaster response plans, and in finding their way through myriad environmental regulations.   In one recent example,  we resolved an insurer’s denial of coverage for water damage based on a theory that the building envelope was defectively designed or constructed and that the damage was not caused by a windstorm (as provided in the policy). By engaging the proper experts, a successful argument was made that the building envelope was properly designed and constructed and that it was indeed the hurricane-force winds that caused the water intrusion.

In another example, we assisted a client in requesting an extension of the expiration date for various development approvals that could not be met due to the direct delays of the hurricane, the difficulty in obtaining materials and the need to redesign to address increases in construction costs.

In addition to helping guide our clients in making proper recovery efforts, we are also focusing our clients’ attention on preventative measures to avoid future repeat damage and liability. We have found that many building and business owners have been hesitant to expend significant sums in prevention, in part to the belief that the recent hurricane landfalls in Florida were merely a fluke.  Whether global warming or a regular climatological cycle, it appears that the Atlantic hurricane season has been on an upswing that may continue for a decade or more. Proper preparation can lessen the business impacts and speed up recovery efforts.


tarping up

        I recently read a bog post about woodpeckers causing unexpected damages to a condominium in British Columbia (Read Here) causing unexpected expense to the association and unit owners. The story got me to thinking about what would happen if something like that happened here in Florida. No, we don’t have a woodpecker problem (though occasionally, some woodpecker will peck on a window) and due to rigid hurricane codes, our buildings are generally concrete block construction which would break a beak or two. But we have other critters that can cause major damage, including, termites, iguanas, rats, opossum and mold spores, to name a few. And, there is the big fear, the natural disaster we all dread: hurricanes.

             F.S. Chapter 718, the Florida Condominium Act, is very comprehensive. Section 718.112(f) requires that the association bylaws must include all of the expenses set forth in section 718.504(21). That section, which deals with the developer’s offering circular, lists all of the expenses that a developer must include in its initial association budget. The expenses include reserves. Section 718.112(f) goes on to provide that, after turnover, a budget may exclude any item which is no longer applicable. However, any association that believes that reserves aren’t applicable must look at 718.112(f)(2)(a) which provides that all budgets must include reserves for capital expenditures for deferred maintenance, including roof repairs, building painting, pavement resurfacing and any other deferred maintenance expenses exceeding $10,000 based on the remaining useful life. Reserve accounts may only be used for their specified purpose unless a majority of the unit owners vote to re-allocate the reserves.

             There is no specific requirement for associations to budget reserves for emergency repairs for things like termite infestation and damage. So what is an association supposed to do when these unexpected events occur? As mentioned above, the association may request a vote of the unit owners to re-allocate reserves to cover the unexpected damage. But, it would then be prudent for the association to make up for the re-allocated funds by special assessment, either one time, or over time, as those reserves will be necessary in the future. The association can also pass a special assessment to cover the need for the emergency repair.

             In the event of larger, but not urgent repairs, the association can borrow money from an institutional lender. There are banks that specialize in condominium financing. The association need not pass a special assessment to cover new debt service. Rather the debt service can often be treated as a line item in the association budget and added into the regular assessment to the unit owners.

             Finally, as to a catastrophic loss, such as those following a hurricane, the association is required to maintain insurance on the condo. The unit owners will likely then only bear the burden of the deductible. Sometimes this burden is significant, as condo deductibles may be high to save on premiums and the number of units to share the deductibles may be low. Unit owners should be certain to maintain condo insurance and make sure that the coverage includes special assessment coverage following a catastrophic loss. In this situation, the special assessment would be covered by the unit owners’ condo policy.

             With proper planning, condo associations and unit owners can have protections against unexpected damage to condominiums. Planning involves some up front cost and adequate funding of reserves. But these costs will always be less than the potential expenses when disaster strikes if unprepared.

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    Welcome to Assouline & Berlowe’s Florida Real Estate Law and Investment Blog with news, insights, and commentary for investors, developers, and their advisors.


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