Q: Our association received a $400,000 settlement from the builder. For the last three years, the association has been using the money to reduce condo fees (assessments.) They are doing it again this year.
Is it legal for the association to do this, or is the association required to make the units pay their full share to cover the current year’s expenses?
If the association’s actions are illegal, is there any recourse against the board for its misdeeds?
– C.S., via email
A: My first question is why did the association receive the $400,000 settlement?
If the settlement was remedy construction defects, the proceeds or at least most of them should have been spent on those remedial measures or placed into the reserves to fund future deferred maintenance and replacement costs for the building components.
If the settlement was for other reasons, such as a recovery by the association from its developer for financial deficiencies, the money received would be considered part of the “common surplus” and likely could be spent for any proper association common expense.
I don’t have enough information to be more specific.
Although I am not an accountant, it seems odd that this large amount would be carried on the association books for several years. If nothing else, this practice could have adverse tax consequences to the association. I would suggest requesting and reviewing the association financial statements for the last three years to see if they shed some light.
If questions remain, send the association a written inquiry via certified mail, return receipt requested.
The association has 30 days from receipt to provide you with a written response. In the alternative, within that time period the association must either request a legal opinion from its lawyer or ask for advice from the state agency that regulates condominiums.
Virtually all Florida community associations are organized as corporations not for profit. This does not mean that they are tax-exempt, as charitable organizations formed under Section 501(c)(3) of the Federal Tax Code are. What it does mean is that associations cannot make distributions of income to its members. Under certain circumstances, though, the association may be able to refund money to members or provide them with a credit toward future assessments.
For example, Section 718.116(10) of the Condominium Act provides that if an association levies a special assessment, it can only use the funds raised for the purpose(s) for which the assessment is levied. If excess funds remain after the purpose for the special assessment has been accomplished, the board must either return the excess to the owners in their proportionate shares or it may apply the excess as a credit for future assessments.
Something to keep in mind for a unit owner contemplating the sale of a unit: If the unit sale closes after a special assessment has been levied but before the purpose for the assessment has been completed or if the association has some kind of contingent gain (such as an insurance or litigation claim), it may be the new owner who reaps the “windfall.” If that is a concern, the seller and buyer need to have a private agreement as to how any future credits will addressed.
THE P IN PROBLEM
Really?!
I had the pleasure of speaking to a large condominium group recently. One of my topics was the “3 P’s” of community law disputes — people, pets and parking.
But, really, the first “P,” people, is the real driving force. Any time I open up a talk for questions, invariably at least one participant will start his or her inquiry with something along the lines of “we have a problem person . . .”
’Nuf said — everyone, including me, groans and nods their heads at the same time.
I never cease to be amazed at the lengths to which seemingly petty disputes between neighbors can go. I keep thinking that nothing will surprise me at this point, but I am always wrong.
In my constant quest for the absurd, I noted a police report that recently appeared in the Longboat Key News. The entry that caught my eye was titled “Styrofoam bowls unacceptable.” Who would not be riveted by that headline in a police report? Picture Joan Crawford and those disgusting wire hangers!
Anyway, it seems that someone (the “complainant”) called the cops because “she has cats that she feeds outside her home and that often the Styrofoam bowls (that she uses to feed them) blow into her neighbor’s yard.”
Allegedly, the neighbor grew tired of the bowls used by the cat lady being on her property and stuck pencils into them and placed them back on the complainant’s property. This action was the basis for the police complaint.
After the timely and sage intervention by the investigating officer, the complainant agreed to use heavier bowls that would not blow away. I am so grateful to know where some of our local tax dollars go and that a global “cat”astrophe was averted.
In the immortal words of Jimmy Buffett, “if we couldn’t laugh, we would all go insane.” Or if not clinically insane, we might all be feeding feral cats from disposable bowls and calling the cops when those bowls littering our neighbor’s yard ended up back on mine.
Pretty much the same thing.
Tamela Eady is a Florida Bar board-certified real estate attorney with more than 25 years’ experience. She is an attorney with Tannenbaum Hanewich, with offices in Sarasota and Clearwater, concentrating her practice on community association and real estate legal matters. The subjects discussed in her columns are not intended as specific legal advice to anyone and are subject to principles that may change over time. Questions may be modified for clarity or for brevity. Email questions for possible inclusion in a future column to TEady@TH-Legal.com.
