To keep it simple……in a condominium, when the board sends out its budget, that budget SHALL include reserve accounts for pavement, painting and roofing and anything else expected to cost $10,000.00 to repair or replace.
However, the statute 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.
If the unit owners don’t vote to waive or reduce the full funding of reserves, full funding of reserves shall go into effect.
Many boards simply hold a board budget meeting, and at that board meeting, count the limited proxies, and announce whether or not there are enough votes to waive or reduce the full funding of reserves. Then they pass the appropriate budget, all at the same meeting.
A closer reading of the statute makes it clear that the waiving of reserves must occur at a unit owner meeting. Then, depending upon the vote at that unit owner meeting, the board adopts the appropriate budget (with or without reserves) at a subsequent board budget meeting.
So, I tell my clients to schedule a unit owner meeting let’s say at 6:45 pm to count the limited proxies and then schedule the actual board budget meeting for 7:00pm. To actually pass the budget depending upon the results of the 6:45 pm meeting.
Remember, the limited proxy must say:
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 that you know how to waive reserves, the age old question is….should you vote to waive reserves? That we will leave for next week.