All Community Association Manager are invited to this exciting event at the Sarasota Yacht Club, see detail below:

The recent decision in the 4^th District Court of Appeals case “Citizens Property Insurance Corporation vs. River Manor Condominium Association Inc.” sheds new light on F.S. 718.111(11)(f).

Condominium association from now on should take extra care to know what property assets are included in their standard insurance policy and which are not.

The River Manor case is a great example and here is what happened:

Citizens insured this condominium association and excluded from the coverage “other structures set apart from the insured buildings by clear space such as carports, cabanas, swimming pools, Jacuzzis, piers, seawalls, decks, patios, etc.”

After Hurricane Wilma went through River Manor and left the association severely damaged the association and Citizens began to fight over the inclusion of the site improvements in the policy.

The argument driving the whole idea going forward with this claim was based on Florida Statute 718.111. River Manor claimed that Citizens’ exclusions conflict with section 718.111(11)(b) (Florida Statutes 2005) because the statute required insurers that issue condominium policies to provide coverage for all portions of the condominium property located outside the units and all portions of the condominium property for which the declaration of condominium requires coverage by the association. Based upon this conflict River Manor says the policy must be amended to delete the exclusions pursuant to the conformance clauses, which provide that “any terms of this policy which are in conflict with the statutes of the State wherein the property is located are amended to conform to such statutes…”

River Manor obviously won the first round in Trial Court; however on April 10, 2013 the 4^th District Court of Appeals overruled this case with the following argument:

F.S. 718.111(11) was not intended to impose a mandatory insurance obligation upon carriers. It said that the statute is intended to regulate the insurance obligation of condominium associations by merely distinguishing what the association is responsible for covering versus what items the unit owners are responsible for and requiring associations to use their best efforts to obtain the best possible coverage. The court further stated that, “as its title suggests, the Condominium Act regulates condominiums and not insurance companies.”

And to say it with even more emphasis the court further stated that “In our view that statute was intended to impose upon condominium associations an obligation to use their best efforts to secure the designated coverage, implying that market forces in some instance may prevent this objective from being achieved.”

This means in plain English, that you will have to be extra, extra careful in the future when purchasing your condominium association coverage. You cannot rely on the assumption that insurance carriers will offer you a package, which will provide you coverage as described in F.S. 718.111(11).

If your site improvements are not covered in your standard policy and it is too expensive to purchase a separate insurance policy for these assets I recommend highly starting a reserve fund for self-insurance purposes.

As always, call or email me with your questions and thank you for reading my blog.

First, let me clarify what ISO stands for:

The Insurance Services Office (ISO) http://www.isopropertyresources.com/About-ISO/About-ISO-Root/ISO-Overveiw.html is a leading source of information for risk management in the insurance industry. ISO provides information for many professions and industry sectors like insurance carriers, finance sector, health services, and real estate in general. Their products help their customers to measure, manage and reduce risk.

Most insurance carriers depend on ISO classifications when it comes to determine the quality of your building and Citizens does not even accept an insurance appraisal without an ISO classification.

ISO came up with six construction classes for commercial buildings:

ISO 1   Frame

Buildings with exterior walls, floors and roof of combustible construction.

ISO 2   Joisted Masonry

Buildings with exterior walls of masonry, but with combustible roofs and floors.

ISO 3   Noncombustible

Buildings with exterior walls, floors and roofs of noncombustible or slow burning material; structural steel, walls and roofs are noncombustible, slow burning fiberglass insulation (for example a warehouse).

ISO 4   Masonry Noncombustible

Buildings with exterior walls of masonry, not less than four inches thick, or buildings with exterior walls of fire-resistive construction with a rating of not less than one hour and noncombustible or slow-burning roofs, regardless of the type of insulation on the roof surface (for example a full masonry building with concrete floors, concrete roof and built-up or membrane roof cover).

ISO 5   Modified Fire Resistive

Buildings with exterior walls, floors and roofs of masonry materials not less than four inches thick or fire-resistance rating less than two hours but not less than one hour. This classification also includes structural steel protection techniques.

ISO 6   Fire Resistive

Exterior walls of solid masonry, including reinforced concrete not less than four inches thick, hollow masonry not less than twelve inches thick; exterior non-bearing walls and wall panels may be slow burning, combustible or with no fire-resistance rating. Floors and roof are cast-in-place and at least four inch thick; the building contains also cast-in-place reinforced beams and columns. All structural steel needs to be protected with proper steel protection techniques. Both, pre- and post-tensioned concrete units have steel cables installed in the concrete to provide tensile strength.

The foregoing is an abbreviated version of the ISO classification which can be found on the website of ISO. http://www.isopropertyresources.com/Training-Education/Construction-Briefs/Construction-Briefs.html

The point being made in this blog is to educate property owners as to the difficulty of determining the proper ISO classification for a commercial building. If the building is twenty years or older, it is unlikely to find the construction plans at the responsible building department and in most cases the condo association boards did not maintain the construction files.

ISO 1, 2, and 3 are easy to classify; however, without construction plans it is very difficult to apply the correct ISO classification, especially between ISO 5 and ISO 6, as it is not readily visible and therefore needs to be clarified with the help of the blueprints.

It becomes even more difficult, when the building consists of two or even three different construction classifications and the question is, if an appraiser or an insurance agent has enough construction background to be able to evaluate which construction has the majority in the building and which ISO classification has to be applied.

It would be too easy to say, well, let us use the lower classification, because the lower the classification, the higher will be the risk and with that the insurance premium. On the other hand, if a higher classification is falsely used, the property owner will pay the ultimate price in the case of a loss, because the insurance will penalize the property or even deny the claim.

Therefore, in some cases it is advisable to have an ISO inspection performed, which takes the liability off the condominium association board, the insurance agent and the appraiser and sets the record straight, once and for all.

Insurance agents and appraisers form a team to be your risk advisors, but don’t be tempted to think that these two professionals know everything. Every profession has its limitations and you should recognize that.

As always, if you have questions, please feel free to use the comment section or send me an email.

This is the second time I am reading a report where economists are worried about cash buyers. The first report was about cash buyers in the Fort Myers area with a leading Realtor voicing concerns that cash buyers, who in most cases are investors and absentee owners, will bring change to the micro market and the local economy.

Now with the national CNN Money report the same concern about cash buyers is brought up; however, more geared towards softening rents in certain areas which will weaken demand. With weakening demand the construction industry which is slowly recovering, could be jeopardized once again. It will be interesting to observe the developments over the next couple of months.

The following is a CNN Money Report:

The housing market has made a big comeback over the past year; home prices have surged some 8% and homebuyers can’t seem to buy up properties fast enough. But just as quickly as the market is gaining ground, some industry experts worry it will come crashing back to Earth. Here are three reasons the housing market recovery may not last:

1. The housing recovery is being led by investors. One problem is that investors are leading the latest surge in home prices, said Dean Baker, co-director of the Center for Economic and Policy Research. They are taking advantage of low interest rates and depressed home prices and when those rates and prices rise, they’ll likely pull back, he said.

“An investor-driven boom is likely to end badly,” said Baker. “I’m worried that some of the big jumps in prices are driven by the same sort of speculation that drove the [original] housing bubble.”

And while institutional investors and small but experienced mom-and-pop outfits have been buying many of the properties, there are a growing number of inexperienced “armchair investors” now buying into the boom — a sign that demand may be peaking, Baker said.

In some hot markets, home prices should start slowing or even reverse gains. In Phoenix, where selling prices were up 23% year-over-year in January, many investors planned to rent out the properties they bought. “Yet, there was no comparable increase in rents and the rental vacancy rate in Phoenix is very high,” said Baker.  As investors realize a low rate of return on their investments, demand will soften, he said.

2. The economic recovery is just not strong enough yet. “These days, I worry more about the economy hurting housing than housing hurting the economy,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a Washington D.C.-based think tank. He’s especially concerned about employment. Hiring slowed significantly in March, with just 88,000 jobs added — the weakest showing since last June.

Meanwhile, half a million Americans withdrew from the workforce during the month; either because they stopped looking for work or retired and stopped drawing unemployment. Many were discouraged workers, a sign that the economy remains weakened. While Bernstein thinks the housing recovery will continue, he believes it will do so at a much slower pace. Once the jobs picture improves, he said strong pent-up demand for homes should emerge.

3. Government cuts will hurt homeowners. Headwinds from the current round of government spending cuts — $85 billion worth — could also curb the housing market’s recovery.

“The spending cuts from the sequestration [will] hit their apex this summer,” said Mark Zandi, the chief economist for Moody’s Analytics.

The cuts, including unpaid days off for federal workers, cuts in unemployment compensation and decreased military spending, combined with the expiration of payroll tax breaks earlier this year, will lead to job and income losses that could strip about a percentage point off the GDP this year, according to Bernstein.

And while current mortgage rates remain extremely low, about 3.5% for a 30-year, fixed-rate loan, they’re bound to go up, the industry experts said, making it a lot more costly for people to afford homes.

“I’m worried that it’s too tough for many people to make the family budget, including the mortgage payment,” said Bernstein.

For the last seven years real estate sales dragged on and on and the prices came down significantly. Now the drought is finally over and residential real estate is on the road to success. There is still a large amount of foreclosures and bank owned property in the market and prices in this submarket are still low. If a buyer has the time to wait for a good deal, there are still some good deals out there. In the traditional market (no foreclosure or short sales) the values are rebounding and the inventory is at a historical low in the medium price segment. See more information in the image below:

Real Estate Is Back – 2013 ActiveRain Survey

If you are a Community Association Manager, you are invited to our free lunch and CEU class. I am looking forward to seeing you there!

Combining your professional business passions and your love for a good cigar, just makes sense!

Yes, it might come as a  surprise to many, but I really appreciate a good cigar from time to time.

A couple of years ago I got my hands on some nice Cuban cigars (please don’t ask how) and shared them with a local group of Sarasota, Florida cigar lovers. From that point on, and as a member of a cigar club, it’s become a form of social networking for not only my personal life, but my professional life as an SRA Insurance appraiser also. 

Together, with a glass of red wine, preferably Seven Deadly Sins, a cigar can provide for an extremely relaxing time. The conversation flows easily and the daily treadmill of my work as an SRA Commercial Real Estate Appraiser is quickly forgotten.

When you discuss the the quality of the cigars with other enthusiasts,  instead the troubles of your workday, many times you are able add balance to your work and life.

Cigar smokers are a tight knit group who tolerate non-smokers, as long as they do not complain, and aren’t too keen on cigarette smokers, who are generally banned from good quality cigar clubs.

Over the years I combined my quality assurance process for my appraisal reports with my love for a good cigar. Monday and Wednesdays are usually my inspection days and the rest of the week are production days in my office. But the highpoint of the week is Friday or Saturday evening when I take my week’s production and proofread my reports over a good cigar.

Over time I noticed more and more young people who come to the club, bring their laptops, socialize and study for their exams over some cigars. It is a piece of culture you can bring your work to or vice versa. The only disadvantage is the extreme cigar smoke creeping into your clothes and files and folders. There is a dry cleaner for the clothes, but the files and reports will keep that distinct smell for a long time. A smell which, tells me many of my reports passed have passed a quality assurance procedure.

The next time you’re in the Sarasota-Bradenton Florida area and would like to sit for a while, contact me. If you need a great referral to start a wonderful new hobby, I can assist you there also!