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Home » Property Management » Top Risk Management Issues for Florida Condo Management Companies

Florida Statutes 718.203 extensively deals with the warranties applicable to condominium developers in the state. As per the Warranty Law, the developers, just like the unit owners, successor owners, contractors, and associations are liable for the merchantability and fitness of the intended uses or purposes.

The aforementioned statute covers a broad warranty for all the improvements, be it structural, electrical, building envelope, mechanical, and also the personality of the condominium. As a result, the Condominium Act of Florida has paved the way for lawyers to target associations. But while the liabilities cannot be delegated or avoided, they can be managed.

In this post, we’ll highlight some of the most common issues for Florida condo management companies to help them better manage the liabilities related to condominium projects.

1.  Don’t Allow Waivers or Limitations by Contractors and Architects

Demanding limitations on damage exposure and waivers on consequential damages has become increasingly common among contractors and architects in Florida. If you check the standard AIA agreement closely, you’ll notice it has a provision for mutual consequential damages waiver. And more often than not, most developers use the standard AIA agreement without any customization (discussed in detail in the 2nd point), even for luxury properties.

For developers, such kind of limitations, waivers, or caps are detrimental. They basically mean that developers should self-insure against such exposures. Thus, it is essential for the developers to always work with reputed entities that ensure quality work and are open to problem-solving if the need arises.

Here are some additional measures that can help-

  • Damage limitations, if any, should always be in line with actual project risks which can significantly vary between projects
  • The waivers and caps should only apply to property defects and damages and not personal deaths or injuries
  • The damage limit should always be above the insurance limit of the project or else the developer ends up paying for the coverage that cannot be tapped
  • In case the company is not agreeing to a higher cap, ensure the liability cap is carved by excluding the damages covered in the insurance policies that apply to the condominium project

2. Customize the Construction Contracts and Project Designs

The standard AIA agreements are commonly used by developers with zero modifications even for complying with the state laws related to aspects such as indemnity. However, the project scope itself should be clearly defined to confirm that the undertaken project is that of a condominium located in Florida and if possible, referencing to condominium declaration.

The goal here is locking the bonding entity and even subcontractors along with their carriers to the liabilities of the Condominium Act. The project beneficiaries, including the property owners and associations, should also be referenced in the contract. Last but not least, there should be explicit reference to the warranties included in Florida Statutes 718.203.

3. Ensure a Building Envelope Specialist is Hired by the Architect

Ensure a Building Envelope Specialist is Hired by the Architect

Florida weather, especially in the southern part of the state, can be ruthless on the buildings. More often than not, defect claims from condominiums often arise due to the failure of building envelopes. Unfortunately, most architects don’t have the expertise of building envelopes, especially ones that could withstand brutal weather.

However, there are consulting firms specializing in building envelopes. But the issue here is who contracts the specialist. Many developers hire envelope specialists to peer review the architect’s design even though this is not the best way out. The specialists should be hired by the architects so that they can together create cost-effective designs that can work with the Florida weather.

4. Subcontractors Should Be Under the Purview of the Contract Provisions

The subcontractors are often excluded from construction contracts. However, the contract must require even the subcontractors to assume some obligations and duties, especially ones related to the work standards. Generally, developers don’t directly deal with the subcontractors or their subcontracts. But with the subcontractors included in the base contract, developers get a certain control over them.

Key terms related to insurance, indemnity, waivers, damage caps, etc. should fully comply with the expectations of the developers. But while it is the contractor that is often considered fully responsible for the work, subcontractors are also generally named in ensuing litigations. So, if the subcontractor is already included in the base contract, it could help with speedy settlements.

5. Pre-Construction Should Be Done By Contractors

The Spearin Doctrine often comes to the defense of the contractors when there are any design-related problems. However, when you involve the contractor right when the project is in the designing stage, it can be challenging for them to use the Spearin Doctrine to their advantage.

So, rather than hiring the contractor once the designs are already made, hire them when the architect is working on the project designs so that all the matters related to schedule and cost are effectively addressed at every stage. It will also make constructability and design reviews more practical and helpful.

The Importance of a Customized Condominium Management Plan

The Importance of a Customized Condominium Management Plan

A personalized management plan can come to your rescue in limiting liability risks. Make a note of the measures discussed above and give special attention to project design and construction along with maintenance and operation protocols to effectively combat the liabilities of any condominium projects.

The primary objective is to ensure every party involved in the project takes full responsibility for their work and that there is adequate evidence to confirm the same in the case of litigation. If you’re a property investor looking for an effective solution to minimize liabilities and manage your investments more effectively and profitably, reputable Florida condo management companies can help.

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Contact us at (561) 944-2992 to learn more about our unparalleled services and unbeatable prices and let real estate pros take care of your investments while you enjoy complete peace of mind and next-level profits. Alternatively, you can also fill out our Contact Form and we’ll get back to you at the earliest.

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