CAN THE BOARD FORCE FULLY FUNDED RESERVES?

I always thought that the dry part of the Board Certification Course was teaching about budgets and reserves.  The material simply doesn’t lend itself to any interesting side stories or provide much room for jokes or even amusing anecdotes.  However, the funny thing is that it’s normally the part of the seminar that gets the most questions from the audience.  The questions keep coming about pooling vs. straight line reserves, what items get put into the reserve account, can the association switch from straight line to pooled reserves, is a unit owner vote required, can reserves be waived, and on and on and on.

There is one moment however that gives everyone a little bit of a jolt.  It’s when I tell them that if the Board of Directors wants reserves to be fully funded, the reserves will be fully funded, like it or not.  People get upset.  They know that the unit owners have the right to vote down any funding of reserves, so how then is it possible that the Board can force fully funded reserves down their throats?

If you look closely at the Florida Condominium Act, it is clear that the Act requires the Board to mail out the budget showing reserves as fully funded.  I’m paraphrasing, but the statute then goes on to say that the unit owners can vote to waive reserves completely or vote in favor of partially funded reserves.  However, the statute nowhere requires that when the Board sends out the budget, they must provide that opportunity to the unit owners by enclosing a proxy to waive or reduce the funding of the reserves.  Check it out, it’’s not there.

Sure, if the Board sends out a budget only showing the reserves as fully funded, the unit owners can get together and have a meeting, obtain a quorum and vote down the funding of a reserve account.  I simply have never seen that happen in my entire career.  If the Board doesn’t send out the forms and/or set down a vote to waive the reserves, the unit owners have to accomplish this waiver on their own, and it ain’t easy. (I know a lawyer shouldn’t use the word ain’t)

I’m not condoning the actions of a Board that would simply impose its will on the community and force fully funded reserves on the owners.  I write to merely point out that if they want to, they can.  Don’t shoot the messenger.

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