Q: My condo association just passed this year’s budget and we received a notice that they want us to vote on whether or not to “waive the reserves”. Could you explain exactly what the reserves are for, what waiving them means, and the consequences for voting either to waive or not waive them?
G.G. West Palm Beach, FL
A: Florida Statutes, Section 718.112(2)(f), requires that, in addition to annual operating expenses, an association’s annual budget must include reserve accounts for capital expenditures and deferred maintenance. Items provided for in the reserves must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000.00. The statute has a particular formula for calculating the reserves in each annual budget, which is on a “straight-line” basis, based upon (i) estimated remaining useful life and (ii) estimated replacement cost or deferred maintenance expense of each reserve item. Practically speaking, this just means that the association needs to spread out the eventual cost of these large maintenance projects across all members each year for the total time of the remaining useful life of the existing improvements, so the necessary funds are already in reserve when it comes time to pay for the replacement of that item. Note that the association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance. An association may, by a majority vote at a duly called meeting of the association membership, vote to provide no reserves or less reserves than required by the statute. Waiving the reserves is an option for associations that are looking to reduce their annual expenses for that year, which keeps the regular monthly or quarterly assessments lower for all members; however, the downside of waiving reserves is that if that amount is not made up in the reserve schedules in future years, the association will likely need to pass a special assessment when it comes time to take on these large capital projects that would typically be covered by the reserves.
Q: Can a gated Community enforce City, County, and State Codes and Laws if they aren’t mentioned in the community’s HOA documents? As an example, can our HOA enforce the failure of an owner to not pay the necessary taxes when renting their property?
P.R. Plantation, FL
A: Community associations in Florida do not have policing powers to enforce State, County, or Municipal governmental and quasi-governmental laws, ordinances, codes, and regulations (collectively, “Regulations”). Additionally, it is not the intended purpose of an association to ensure compliance with Regulations. While some association governing documents specifically state that all homeowners and residents must be in compliance with all Regulations, the Association does not have the power to enforce such a restriction on behalf of the applicable government entity. For example, an association could not issue a fine to a homeowner whose hedges exceed the height specified by the code of the municipality in which they are located, unless the height is also specified in the association’s architectural guidelines.
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Avi S. Tryson, Esq., is Partner of the Law Firm Goede, DeBoest & Cross. Visit www.gadclaw.com or to ask questions about your issues for future columns, send your inquiry to: question@gadclaw.com. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross, or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.