Q:After reading my condominium bylaws and Chapter 718.112, Florida Statutes, it is my understanding that the association board of directors cannot waive or reduce the funding of reserves without a majority vote of the owners at a duly called meeting of the association.
Our association budget for 2013-14 was sent to the members and adopted by the board at the February meeting. The newly adopted budget reflects a reduction in reserve funding of almost $44,000, including the elimination of funding of an entire reserve section that appears in the original reserve study.
A so-called new reserve study was done by a committee of owners chosen by the board.
I am very concerned that the board is not guarding or preserving the rights of the owners and that they are not meeting their fiduciary duties. – M.W., Bradenton
A:You are right about the restrictions on a condo board's ability to unilaterally reduce or waive the funding of reserves.
Reserves must be fully funded for all accounts for roof replacement, building painting and pavement resurfacing, regardless of the cost, plus any other item for which the replacement cost or deferred maintenance cost exceeds $10,000.
The only way around that requirement is if the owners vote to waive or reduce funding, and only after the full funding amount is disclosed.
The vote request to waive or reduce funding has to carry the following caveat in bold letters: WAIVING OF RESERVES, IN WHOLE OR IN PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.
That being said, I cannot say, based on the facts you presented, that your board acted inappropriately.
The condo statute allows some flexibility. Budgets, including reserve funding amounts, are just estimates, and accounts and funding requirements need to be adjusted periodically.
The law provides 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.
I am concerned that an entire reserve category was eliminated, but I would start by addressing your concerns in writing to the board (sent certified mail, return receipt requested) and see what response you get.
Ask to see the new reserve study. If it does not make sense to you, you may wish to contact the state Division of Florida Condominiums, Timeshares and Mobile Homes to see if they can offer some guidance.
Too little info
I have received so many inquiries lately from owners concerned that their HOAs are overstepping their authority in violation of the law. These issues have included financial reporting, reserve funding and the enforcement of architectural review standards.
I can't provide definitive answers.
In many of the past several years, the Florida Legislature has passed laws that bring HOA law more into conformity with the law that regulates condominiums but, as of today, those two laws continue to diverge.
As a general rule, unless the HOA law specifically spells it out, to a large extent, the answer to the board's authority lies in the governing documents for the community.
Without a thorough analysis of those documents, I can't give an educated opinion.
Not that I am asking to have those documents forwarded to me. Always remember that you get what you pay for.
Tamela Eady is a Florida Bar board-certified real estate attorney with 25 years' experience. The subjects discussed in the above article are not intended as specific legal advice to anyone and are subject to principles that may change from time to time. Questions may be modified for clarity or for brevity. Reader questions may be directed to Tamela Eady for possible inclusion in a future column via email to tew@lawbywiseman.com.
