IT’S TIME TO PREPARE THE 2021 BUDGET AND IT MUST INCLUDE RESERVES IN YOUR CONDO

As Rafael will tell you later this week, management companies will start working on the 2021 budget for your association when summer comes to an end.  Remember, even in condos where reserves are despised, hated, frowned up and scorned, your budget must still include a reserve analysis, like it or not.

 

Florida condominium law 718 (2)(f) 2a states:

In addition to annual operating expenses, the budget must include reserve accounts for capital expenditures and deferred maintenance. These accounts 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. The amount to be reserved must be computed using a formula based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item.

 

But….if you want to waive reserves, the law gives you that option and says:

This subsection does not apply to an adopted budget in which the members of an association have determined, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by this subsection.

The logistics:

The budget meeting is a board of directors meeting.  They get to vote on the budget, not the unit owners.  Notice however that if you want to waive reserves, it must be done at “a meeting of the association. ”  That means a meeting of the owners and a quorum must be present.  So….if you want to waive reserves there must be two meetings.  Usually, I have an owner’s meeting at let’s say 7:00 pm to count the votes and proxies to waive reserves.  And depending upon the outcome of that vote, at 7:15 we have another meeting in which the board adopts the budget in accordance with the vote that occurred at the 7:00 meeting.  If at the 7:00 meeting, the owners waived reserves, then at 7:15 the board adopts a budget with no reserves.  But, there must be two meetings.

Also, in a condo, the Board is only required to send out a budget with fully funded reserves.  They can also send out alternative budgets showing no reserves or partially funded reserves but, they don’t have to.  So, if a Board wants fully funded reserves, they simply send out one budget with fully funded reserves and pass that budget.  Then, it would be up to the owners to get that quorum together at a meeting and vote to waive reserves.  Not easy.

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