Fall is the time when Boards and their managers start scrambling to make next year’s budget. Here’s a few tips:
Remember that in a condo, the budget must be mailed to the owners 14 days in advance of the budget meeting. In an HOA the association shall provide each member with a copy of the annual budget or a written notice that a copy of the budget is available upon request at no charge to the member.
The condo statute specifically contains all of the items to be included in the budget. The HOA statute says that the budget must reflect the estimated revenues and expenses for that year and the estimated surplus or deficit as of the end of the current year.
In a condo, the budget must be sent out showing the reserves as fully funded. The board can however pass a budget that has no reserves or less than fully funded reserves if the unit owners vote for same, at a meeting to take place before the actual budget meeting. In an HOA the budget must include reserves if the governing documents provide for same or the unit owners previously voted to include reserves in the annual budget and have not voted to waive reserves.
If your condominium or HOA has funds on hand that are not included in reserves and total more than a few months of assessments, these funds are considered “surplus funds” and should be used to decrease the amount of assessments charged to the owners in the coming year, or these surplus funds should be returned to the owners.
Finally, at least in some parts of Florida, foreclosures are starting to rear their ugly head again. Associations are well advised to include a line item in their budget for “bad debt.” This is simply a number that you anticipate will equal the amount of assessments that unit owners won’t pay in the coming year. To simply, if you believe 3 owners won’t pay their $5,000 in assessments this coming year, you should include a line item of $15,000.00 in your budget, called “bad debt.”
If I’m being honest, there is one area that associations tend to under budget each year. You guessed it —— attorney’s fees. Associations need to be realistic. If the Board is going to be aggressive and seek legal help for collections, arbitration actions, lawsuits, contract reviews and the like, it’s probably a good idea to budget more than just a few hours of attorney’s time each year. In any event, good luck with your budget process and start thinking about sending out your election materials at least 60 days in advance of the election and annual meeting.