DID YOU CORRECTLY WAIVE YOUR RESERVES?

As the weather begins heating up, our thoughts inevitably turn to the hurricane season that we deal with each and every year.  Associations all across the state hope and pray that they’re able to escape the wrath of a storm for another year and that luck remains on their side.  They have their fingers crossed that they won’t have to pass a special assessment as a result of storm damage, because they have taken the gamble on waiving reserves.

In both condominiums and HOAs we know that the unit owners can waive the funding of a reserve account.  In fact, in HOAs, your community may not even need to take a vote, if reserves were never initiated by the developer, the unit owners never voted for reserves and your Board doesn’t care about initiating reserves either.

In a condo however, reserves MUST be included in the budget and MUST go into effect unless the reserves are voted down by a majority of the owners present at a meeting where a quorum is present either in person or by proxy.  In fact, the vote to waive reserves is usually done by way of proxy.  Several years ago, Florida Statute 718 was amended so that unit owners automatically get a warning about the dangers of waving a reserve fund when they are asked to choose whether or not to waive reserve funding on a proxy form.  Here’s what is now required:

 

Proxy questions relating to waiving or reducing the funding of reserves or using existing reserve funds for purposes other than purposes for which the reserves were intended shall contain the following statement in capitalized, bold letters in a font size larger than any other used on the face of the proxy ballot: 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.

 

Now, if you vote to waive reserves and a storm hits, and you are hit with a massive special assessment and complain about it, this form with your signature on it will be shown to you as a reminder of the knowing gamble that you took when signing the form.

I have seen associations using old out-dated proxy forms that do not contain this language.  If you are not using the correct form, you did not correctly waive the funding of reserves.  Any incorrect proxy vote you did accept to waive the reserves is invalid and you need to either retake the vote using the correct forms or start collecting for reserves in your budget.  If your budget contains reserves — smart move.  If it does not, I hope you don’t roll a seven this hurricane season.

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