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By Casey Tolan, Curt Devine and Francesca Giuliani-Hoffman, CNN

An independent budget review warned the Champlain Towers South condo association that its financial reserves were critically underfunded in the face of urgently needed structural repairs a little over a year before the building collapsed, a document obtained by CNN shows.

The condo association only had 6.9% of the recommended level of money to complete repair and replacement projects and stay financially secure, according to a March 2020 report from Association Reserves, a company that analyzes housing association finances.

The report said that various components of the Surfside, Florida, building had zero years of “remaining useful life.” Those included the entrance and garage — where some experts believe concrete cracking may have contributed to last month’s deadly collapse.

The study, which has not been previously reported, underscores how squabbling over assessments and underfunded reserves brought the repair situation at Champlain Towers South to a head.

The association was projected to have a little over $706,000 in its reserves as of January 2021, according to the report, while Association Reserves recommended it stockpile nearly $10.3 million to account for necessary repairs.

Based on that gap, the report found that the Champlain South board was at “high risk” of “special assessments & deferred maintenance.” About a year after receiving the report, the board moved in April 2021 to levy a $15 million special assessment on condo owners to raise money needed for repairs.

Robert Nordlund, the founder and CEO of Association Reserves, told CNN in an interview that about three out of 10 condo associations nationwide that his company reviews are at high risk, with less than 30% of the recommended reserves. He said the report showed the importance of condo associations stockpiling enough money to conduct regular repairs.

“I just wish they had hired us five years or 10 years or 20 years prior,” he said of the Champlain South condo board.

The board had never previously received a reserve budget study, according to a separate PowerPoint presentation to residents from November 2020. The presentation alluded to the contentious debates among owners about the big-ticket items. “Complaining Or Shouting At Each Other Doesn’t Work!” one slide of the presentation said, underlining the statement.

The lack of reserves complicated the condo association’s efforts to secure money for repairs. Another presentation to residents in December 2020 said that “two major HOA [Homeowner Associations] lenders declined us” for loans.

The loans were declined because the condo association was in a “higher risk category” due to its relatively low monthly maintenance fees and the lack of funds saved in the reserves, according to the presentation.

“We should have a lot more money in the bank for lenders to be comfortable,” the presentation stated. “We have not done reserve studies or set enough reserve money aside to prepare for this day.”

The condo association did eventually secure a $12 million loan from Valley National Bank in March 2021 to pay for repairs, according to financial documents obtained by CNN. The $15 million special assessment was designed to pay that back.

Nordlund said that he believed his company’s report was “a wake-up call” for the condo board, spurring the assessment.

The report, which included a visual inspection of the building, also includes photos of damaged concrete on the balconies and facade. Nordlund said that as part of the report, his employees reviewed the 2018 engineer’s study warning of “major structural damage” in the building’s concrete. He said the designation of zero years of useful remaining life for areas such as the garage was likely inspired by that report, and meant that repair projects “need to be done immediately.”

A spokesperson for the Champlain Towers South condo association did not provide comment about the budget report. Donna DiMaggio Berger, an attorney for the association, told CNN’s Chris Cuomo last month that under Florida law, association boards create operating budgets with reserves but a majority of association members can vote to waive reserves.

“In far too many communities we do have members voting to waive reserves each year,” she said.

Peter S. Sachs, a Florida attorney who specializes in condominium law, said the report shows the board tried to “do the right thing” by obtaining a thorough analysis of its reserves. But he said it also reveals how “prior boards may have been asleep at the wheel or unable to overcome political resistance from the unit owners” to raise money for maintenance.

The collapse should inspire new regulations requiring condo associations to save reserve money and avoid deferring necessary maintenance, said Eric Glazer, a South Florida-based attorney who is part of a committee that will be advising the task force reviewing Florida condominium law in the wake of the collapse.

“Florida needs to step up and force people to put money away for a rainy day,” Glazer said.

Florida law already mandates condo associations keep reserves for repairs that cost more than $10,000, but a majority of owners can vote to waive that requirement, legal experts in the state said.

In 2008, the state passed a law requiring condo associations to conduct reserve studies at least every five years. But that rule was repealed in 2010 amid criticism from some real estate lawyers and property managers, NBC News reported Thursday, and regular studies are no longer required.

Nine other states around the country require associations to conduct some form of reserve studies, according to the Community Associations Institute, a trade association.

Nordlund agreed that the building collapse could lead to changes in the practice of condo finances. After the disaster, he said, “we scoured that file, looking, did we miss anything?”

“We are in the budget business, not the safety business,” he said. But if the board had conducted an earlier budget study and moved more quickly to raise money and conduct repairs, he said, it could have possibly meant “preventing a tragedy.”

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