Crunch Time: Implementing Structural Integrity Reserve Study (SIRS) Requirements
With budget season and the Structural Integrity Reserves Study (SIRS) deadline fast approaching, condominium associations should already be considering how they will implement SIRS-related obligations and the timing in which funding will begin. Condominium associations that haven’t yet obtained their SIRS should already be making arrangements to do so prior to the end of the year. There are various integrated issues to consider relating to SIRS implementation that can dramatically affect the budget for 2025 and beyond.
Structural Integrity Reserve Study (SIRS) Overview
It is well known that Florida law now mandates that all residential condominium associations with a condominium structure that is three (3) stories or higher, as determined by the Florida Building Code, must complete a Structural Integrity Reserve Study (SIRS) at least once every ten (10) years, and that an initial SIRS must be completed by December 31, 2024, with very limited exceptions. The SIRS evaluates and discloses the reserve funds necessary for future major capital repairs, deferred maintenance, and replacements of condominium property relating to the structural components of buildings three or more stories in height. The goal of the SIRS is to determine a recommended annual reserve amount that will cover the estimated costs of replacement or deferred maintenance for the covered building components by the end of their remaining useful life or to satisfy a professionally recommended deferred maintenance protocol. For any budget adopted on or after December 31, 2025, the reserves for the costs identified in the SIRS must be incorporated into the association’s annual budget, and such annual funding may not be waived or reduced by the membership, or used for any other purpose.
Key Deadlines and Requirements
SIRS Completion: Associations existing on or before July 1, 2022, and controlled by unit owners (not developers), must complete a SIRS by December 31, 2024, for each building on condominium property that is three stories or higher. However, Florida’s Senate Bill 154, signed into law in June 2023, allows associations required to complete a milestone inspection on or before December 31, 2026, to complete the SIRS simultaneously with the milestone inspection, but these associations must complete the SIRS by December 31, 2026, as well. Fla. Stat. §718.112 (g)(6).
Annual Budget Incorporation and Restriction on Waivers and Use for Other Purposes: Section 718.112 (f)(2a) of the Florida Statutes requires that for any budget adopted on or after December 31, 2025, the budget must include SIRS reserves, which cannot be waived or used for other purposes. There is an ambiguity regarding whether this means that a budget adopted prior to December 31, 2025, need not factor, disclose, or fund the SIRS at all, or whether the budget must include the SIRS reserves unless they are waived or reduced based on the approval of a majority of the membership voting interests. While the statutory verbiage could be read to suggest the latter, anecdotal comments from State Representatives about the legislation suggest that the intention was that SIRS funding would not have to begin at all until 2026 if the 2025 annual budget is adopted prior to December 31, 2025. Condominium Associations should document their business judgment and reliance upon legal counsel in making a budgetary decision about the implementation of the SIRS requirements for any budget adopted prior to December 31, 2024.
Additional Budget Considerations
Non-Structural Integrity Reserves: Reserves that fund components that are not considered structural integrity reserve components can still be waived or reduced by a majority of all voting interests, but careful planning is required to determine what reserves are required to be funded annually that are excluded from the SIRS. Additionally, condominium associations can consider whether to approve the waiver or use of such non-structural integrity reserves for another purpose such as additional funding for the structural integrity reserve components to lessen the budgetary impact of the commencement of mandatory SIRS funding.
Resolution for Optional Reserves: Associations should review existing reserves to identify optional reserves that can be adjusted to offset the increase in reserve budget caused by the SIRS. Optional reserves are those reserves that fund components for which reserves are not actually required by law. For example, certain components, such as personal property like furnishings and gym equipment, are not among those that are listed as requiring reserves in the statute and do not cost more than $10,000.00 to replace. Many condominium associations voluntarily choose to fund reserves for certain components they don’t have to based upon very inclusive reserve studies, and the aggregation of many components that standing alone would not meet the mandatory reserve threshold cost. Many associations fund these reserves habitually or as a matter of fiscal conservatism, but may want to revisit such practices in light of the new SIRS obligations. A resolution to remove or adjust optional reserves can be considered by the Board.
Components Not Maintained by the Association: Condominium associations do not have to reserve for components that the association does not maintain or for components that are not part of the condominium property. For example, associations operating a condominium in which members are responsible for maintaining their windows, do not have to reserve for those windows maintained by the owners. Similarly, condominiums located in mixed-use subdivisions that fund shared components, do not have to reserve for the long-term capital replacement and deferred maintenance funding obligations for shared components not maintained by the association or part of the condominium property. Fla. Stat.§ 718.112 (g)(4).
Pooled (Cash Flow) Versus Straight-Line Funding Methods: Condominium associations should consult with legal counsel about whether structural integrity reserves can be funded using the more flexible cash flow (pooled) method, in which reserves in the pool can be allocated to any of the reserve components included within and funded by that pool, versus the straight-line method, in which every reserve component must be funded individually and should be presented as a distinct line entry in the reserve schedule included within the budget. Straight-line funding eliminates the flexibility to use allocated funds for another reserve component, and over time increases the mandatory annual funding. SIRS legislation did not directly address the question of whether structural integrity reserves can still be pooled; however, presuming they can, it is evident that structural integrity reserves cannot be pooled along with non-structural integrity reserves. This is because structural integrity reserves can never be used for any other purpose.
If a condominium association desires to switch to a pooled reserve account on a going-forward basis, this requires a membership vote to use previously collected reserves for an alternative purpose by moving previously collected reserves from their allocated component into the pool.
Associations should also consider whether to seek member approval (a majority of the membership voting interests) to transfer pre-existing reserve beginning balances from one reserve account to another reserve account as part of the adoption of a post-SIRS budget. This may be an integral part of reserve planning if reserve schedules are incorporating the use of pre-existing balances for pooled reserve components to which such balances were not previously allocated. Notably, since 2023 the membership vote required to waive or use reserves for an alternative purpose (including to use them for other items in the pool) is a majority vote of the total eligible voting interests of the association.
Record Keeping, Notice, and Disclosure.
Within 45 days of receiving the structural integrity reserve study, the association must either send a copy to each unit owner or notify them that the completed study is available for inspection and copying upon written request. This must be done by United States mail or personal delivery to the mailing address, property address, or any other address provided by the owner for association notices. Alternatively, it can be sent electronically to the e-mail address or fax number for owners who have previously consented to receive notices through electronic transmission. Fla. Stat. 718.112 (g)(9).
Thereafter, notice of such dissemination must be provided to the Division of Florida Condominiums, Timeshares, and Mobile Homes. Additionally, each SIRS report must be kept in the official records for at least fifteen (15) years and must be available for disclosure to prospective purchasers who are under contract. In the absence of an SIRS, the association must have a statement available in its records to the effect that the association has not yet completed a structural integrity reserves study, which a prospective purchaser under contract is also entitled to in the alternative to a completed SIRS.
At Haber Law, we strongly recommend a proactive approach to reviewing your Association’s obligations for SIRS compliance. Our office can conduct a detailed analysis tailored to your Association’s unique circumstances and provide a written plan to ensure timely compliance with the necessary requirements, including Milestone Inspections and SIRS. We’re also available to meet with the Board at your convenience to discuss these or any other matters.
Promptly addressing these requirements is critical to avoid potential penalties. If you need further assistance or clarification, please reach out to us. At Haber Law, we are committed to helping your Association navigate these new legal obligations effectively and efficiently.
THE INFORMATION CONTAINED IN THIS ARTICLE HAS BEEN PREPARED FOR INFORMATIONAL PURPOSES AND DOES NOT CONSTITUTE PROFESSIONAL ADVICE. YOU SHOULD NOT ACT UPON THE INFORMATION CONTAINED IN THIS ARTICLE WITHOUT OBTAINING SPECIFIC PROFESSIONAL ADVICE.