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Find Blog Articles for Florida’s Condo, HOA and the Management Industry.
The “state of emergency” that had been imposed by Governor DeSantis in light of the COVID-19 pandemic expired on June 26, 2021. As a result, the “emergency powers” given to condominium, cooperatives, and homeowners’ associations in Sections 718.1265, 719.128, and 720.316, Florida Statutes, respectively, are no longer in effect. The emergency powers that were in effect during the COVID-19 state of emergency included conducting board meetings and membership meetings with notice given as is practicable, but did not specifically give associations the authority to conduct meetings remotely. Nevertheless, many associations did hold meetings remotely in an effort to slow the spread of the virus and to protect its residents and employees. (NOTE: The emergency powers statutes were amended effective July 1, 2021, and now specifically provide that during a declared state of emergency, the association may conduct board meetings, committee meetings, elections, and membership meetings, in whole or in part, by telephone, real-time videoconferencing, or similar real-time electronic or video communication.)
Now that the state of emergency has expired, what meetings can associations hold remotely, either in whole or in part?
With regard to board meetings, the statutes specifically address the board members’ participation by telephone or videoconferencing, but do not address whether owners may participate remotely or whether the owners can be required to participate remotely. The statutes do provide that meetings of the board must be “open” to all owners. If your board wishes to hold remote board meetings, the board can allow owners to also participate remotely in the same manner as the board members by giving the owners the call-in number or videoconference link. The law is unsettled as to whether a remote only meeting is valid, as some owners may not have the capability or desire to participate remotely.
With regard to owner meetings, the statute governing corporations not-for-profit, Section 617.0721(3), Florida Statutes, provides that owners and proxyholders may participate remotely and can also vote remotely if authorized by the board of directors, and subject to such guidelines and procedures as the board may adopt. But as with Board meetings, none of the statutes indicate whether “remote only” meetings, which require the owners to participate remotely, are valid. (Note that this type of “remote voting” contemplated by Section 617.0721(3) is different than the electronic/online voting that is permitted by Sections 718.128, 719.129, and 720.317, Florida Statutes).
For owner meetings at which an election will be held, the issue is more difficult. The Condominium and Cooperative Acts require owners to vote by “secret ballot” and many homeowners’ associations governing documents also have a secret ballot requirement. In that case, an owner participating remotely would be unable to vote on the election of directors unless the owner voted in advance of the meeting or unless the association had authorized electronic/online voting pursuant to Sections 718.128, 719.129, and 720.317, Florida Statutes). Further, in condominium and cooperative associations, the “election committee” that opens and counts the election ballots must be physically together, and owners are entitled to observe the ballot counting process in the owners’ “presence”.
Because of these legal issues, a “hybrid” approach where owners are given the option to participate remotely, but are not required to participate remotely, is the best approach. Some meetings lend themselves to remote participate more than others. For instance, board meetings and non-election owners’ meetings are the types of meetings that can be managed remotely. However, if there is an election, there will need to be additional considerations.
Boards should discuss these issues with the association’s attorney so that all of the necessary board authorizations can be prepared and approved by the board.
Tags: Board of Directors, Condo and HOA, Law and Legal
We’re open and ready to help you get the most out of your insurance claim. As we continue to follow COVID-19 news and updates, we’re committed to being there for you when you need it. Many times, insurance claims are time-sensitive (especially when it comes to hurricane damage claims), so it’s important to begin the process as soon as possible.
As we understand that staying safe and social distancing is key during this time, we’ve introduced virtual inspections via Zoom – so you can begin the process from the comfort of your home. Our claim representative will video chat with you, and you’ll be able to discuss the details of the damage and your concerns. We’ll then put together an action plan to move forward with getting you the payout that you deserve!
You can also learn more about how we’re taking the necessary precautions by viewing our COVID-19 update.
Please send an email over to info@stellaradjusting.com or give us a call at 877-838-6870 and we’ll get you in touch with your dedicated claim representative. We’re open 24 hours, 7 days a week, and are ready to assist you.
Tags: Insurance, Management News
‘Homestead’ (or perhaps ‘homesteading’) is a word you’ve probably heard, but aren’t clear on what it is or means. So when we talk about homestead exemptions for housing, there can be some confusion. A “homestead” is defined as a house, or more specifically a farmhouse, and “homesteading” is defined as, “a lifestyle of self-sufficiency.” Homestead law allows an individual to register a portion of their primary residence (and only their primary residence) as “homestead” to reduce the taxes paid on it. The original goal was to preserve the family farm, home, or other assets in the face of severe economic conditions. See how it all connects?
Homestead exemptions exclude a portion of a home’s value from taxation, so they lower the taxes. For example, if a home is appraised at $100,000, and the owner qualifies for a $25,000 exemption (this is the amount mandated for school districts), they will pay school taxes on the home as if it was worth only $75,000. It also makes that portion of the individual’s estate off-limits to most creditors and protects that value from financial situations that arise due to the death of the homeowner’s spouse (to guarantee that the surviving spouse has shelter).
Now the real disconnect between the homestead exemption and homestead/homesteading is that the only requirement needed to get a homestead exemption is that the home is the owner’s primary residence–no farming necessary.
Homestead, homestead exemptions, and homesteading are all a little confusing. So at some point, you start to wonder how the exemption might impact your community funds or a future collections process. Here’s what you should know:
Luckily, there are some exceptions to the homestead exemption: taxing authorities (state and federal), mortgage lenders, and the community association where the property is located (that’s you!) all have the ability to foreclose and collect if payments are missed.
So if one of your homeowners is behind on their assessment fees and all efforts to collect the debt have failed and the next step for your community is to foreclose, even if they have a homestead exemption, your community association is legally one of the only entities able to go to foreclosure.
Even though “homestead,” “homestead exemption,” and “homesteading” all call back to farming in some way, the homeowner doesn’t have to have a farm, product, or any other traditional ‘homestead’ good or service to take advantage of the homestead law–they just have to own the property it’s being applied to.
That said, there has been a massive resurgence of homesteading in the millennial generation–sort of. Thousands of influencers across social media document their zero-waste lives that use composting, in-home gardening, and reusable items (like fabric grocery bags, beeswax wrappings, and mason jars) to show that they can successfully and beautifully live off of only what they sustain and grow. Some even make their own products to sell like all-natural candles or deodorants.
Depending on the location and size of your community, you may have a few homesteading homeowners yourself. Maybe they’re growing fresh habaneros and cilantro in their garden for homemade salsa, or knitting sweaters out of thread they made from their pet cat Fluffy’s fur (yes that’s a real thing–a real weird thing in my opinion but to each their own).
Whatever they’re doing, they still have to follow the HOA or condo association’s community guidelines. A homestead exemption does not give any homeowner the right to ignore community rules, even if those rules might clash with their new homesteading lifestyle. If they want to raise chickens to have fresh eggs in the morning and so they don’t have to go out and buy eggs from the grocery store, more power to them, but they probably can’t do it in an HOA, and they definitely can’t have chickens in a condo building.
It’s important to know that the homestead exemption varies widely between each state. Some states like New Jersey don’t even have the exemption at all. So for some HOA or condo associations, foreclosing on a home with a homestead exemption might ever happen. If it does happen in your community, remember that the community association has every right to foreclose and collect on a property even if it has a homestead exemption, but working with a specialized collection agency will help make the process that much smoother.
What you need is a specialized community association collection agency that will work with your owners and recover the past due amounts at no cost and no risk to the association. Give Axela Technologies a call today and receive a no-cost analysis and review of a collections process that will fit your community association delinquency problem.
Tags: Board of Directors, Collections, Management News
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Ron Giles
South East Florida Division
1388 NW 65th Terrace
Plantation, FL 33313
561-602-8660
ronnieg@prspipe.com
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Florida has created an abundance of legislation governing homeowners’ and condominium associations. You would think that, by now, laws affecting both types of communities would have more parity than they actually do. (Please note that that commercial condominiums are not addressed in this article.)
Perhaps the most appreciative difference between a homeowners association and a residential condominium association is that the homeowners association exists in common law, but the condominium only exists because of legislation adopted by the Florida Legislature. That said, homeowners associations are subject to Chapter 720, Florida Statutes, and condominium associations are subject to Chapter 718, Florida Statutes. There is both parity and significant differences between these two Acts, the latter of which are further addressed below. We begin by examining bidding.
Bidding: A homeowners association is only required to obtain bids if the aggregate cost of the project (referring to the materials, work, and/or services) exceeds 10 percent of the total budget including reserves, if any. On the other hand, condominium associations are required to obtain bids if the aggregate cost of the project exceeds 5 percent of the total budget including reserves, if any. Please note, there is no requirement in the legislation for a community association to obtain a definitive number of a bids. Therefore, at least two would be appropriate. Also remember, there are exceptions to the bidding requirement for professional services such as attorneys, accountants, and landscape architects.
Certified Written Inquiry: A condominium association owner has the right to send a certified written inquiry to the board, and the board is obligated to answer it within 30 days (or 60 days if the certified written inquiry is provided to the community association’s lawyer to respond to). A failure to respond means that if the owner files a legal action over the item for which certified written inquiry was provided and loses, the owner will not be responsible to pay for the association’s prevailing party attorneys’ fees. There is no similar provision for a homeowners association.
Common Areas: Common areas in a homeowners association are owned by the association itself. In other words, no owner can claim an ownership interest in a homeowner association’s common areas. However, as to condominiums, the equivalent of the homeowner association’s common area is referred to as “common elements”. All of the unit owners of the condominium association own an indivisible interest in the common elements.
Disputes: In a homeowners association, disputes between an association and a parcel owner regarding use of or changes to the parcel or the common areas and other covenant enforcement disputes, disputes regarding amendments to the association documents, disputes regarding meetings of the board and committees appointed by the board, membership meetings not including election meetings, and access to the official records of the association must be the subject of a demand for pre-suit mediation served by an aggrieved party before the dispute is filed in the local court. Before a homeowners association can commence litigation where the amount in controversy is in excess of $100,000, the approval of a majority of a quorum of the membership is required. There is no similar provision as applied to condominium associations.
In a condominium association, prior to the institution of court litigation, a party to a “dispute” (as such term is hereinafter defined) must petition the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation for non-binding arbitration or, as of July 1, 2021, avail themselves of the presuit mediation process as set out in Chapter 720. “Disputes” subject to mandatory arbitration or presuit mediation include 1) the authority of the board of directors, under this chapter or association document to: i) require any owner to take any action, or not to take any action, involving that owner’s unit or the appurtenances thereto ii) alter or add to a common area or element; or 2) the failure of a governing body, when required by this chapter or an association document, to: i) properly conduct elections ii) give adequate notice of meetings or other actions iii) properly conduct meetings iv) allow inspection of books and records; and 3) a plan of termination pursuant to §718.117, Fla. Stat.
Elections: Elections in a homeowners association take place as per the bylaws, while elections for condominiums take place following the regime set out in chapter 718, Florida Statutes, more specifically §718.112, Fla. Stat., and the provisions of the Florida Administrative Code. In order to hold a homeowners association election, a quorum must be attained unless the bylaws provide otherwise. No quorum is required to hold a condominium election, but rather 20 percent of the eligible voters need to cast a ballot in order to hold the election. In a condominium association of more than 10 units, co-owners of a unit cannot serve on the board at the same time unless there are not enough candidates, or they own more than one unit. Commencing July 1, 2018, condominium association board members cannot serve more than eight consecutive years absent certain exceptions (note, this statute is not retroactive in its application). There is no similar co-owner prohibition and term limit restriction for homeowners associations.
Elections by acclimation: In a condominium association if the same number of candidates, or less, run for the board as the number of seats available, then there is no need to have the election. This is referred to as an “election by acclimation” which means, those candidates will comprise the present board upon the annual meeting. If the election is contested because there are more candidates than seats available and at least 20 percent of the eligible voters do not cast a ballot, then last year’s board rolls over.
As to homeowners associations, if the election process allows candidates to be nominated in advance of the meeting, the association is not required to allow nominations at the meeting. An election is not required unless more candidates are nominated than vacancies exist. If an election is not required because there are either an equal number or fewer qualified candidates than vacancies exist, and if nominations from the floor are not required pursuant to the statute or the bylaws and write-in nominations are not permitted, then the candidates who nominated themselves in advance shall commence service on the board of directors regardless of whether a quorum is attained at the annual meeting. Otherwise, if those conditions are not met and a quorum is not attained for a homeowners association’s election, then last year’s board rolls over to this year’s board.
Elections, Voting: Unless otherwise set out in the bylaws, homeowners association members vote in the election for the board by proxy and/or ballot. On the other hand, condominium association owners cannot vote for the election of directors by proxy but rather must vote themselves by secret absentee ballot using the the inner and outer envelope system. A homeowners association only needs to use the inner and outer envelope system when the bylaws call for secret absentee ballots.
Fines: A condominium association cannot levy a fine greater than $1,000 for any one violation and cannot lien and foreclose the fine under any circumstances. In a homeowners association, an association can foreclose to collect a fine if both i) the fine is $1,000 or more and ii) the authority to lien is set out in the declaration.
Frequently Asked Questions and Answers Sheet: As to condominium associations §718.504, Fla. Stat., requires that a “Frequently Asked Questions and Answers” sheet be made available to prospective purchasers and to owners who request it. It must be updated annually and must include the following questions along with the answers to these questions: 1) What are my voting rights in the condominium association? 2) What restrictions exist in the condominium documents on my right to use my unit? 3) How much are my assessments to the condominium association for my unit type, and when are they due? 4) Do I have to be a member in any other association? If so, what is the name of the association and what are my voting rights in this association? Also, how much are my assessments? 5) Am I required to pay rent or land use fees for recreational or other commonly used facilities? If so, how much am I obligated to pay annually? 6) Is the condominium association or any other mandatory membership association involved in any court cases in which it may face liability in excess of $100,000? If so, identify each such case. There is no similar provision or requirement for homeowners associations.
Leasing Restrictions: Effective July 1, 2021 as to HOA leasing restrictions, any restriction that prohibits or regulates rental agreements applies only to (i) an owner who acquires title to a parcel after the effective date of the governing document or amendment, or (ii) an owner who consents, individually or through a representative, to the governing document or amendment. As to condominium associations, according to §718.110(13), Fla. Stat., an amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period, applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of the amendment.
Liens and Foreclosures: In a homeowners association, prior to recording a lien against a delinquent owner’s lot, the owner must be provided a statutorily compliant warning letter at least 45 days prior to recording the lien, warning the homeowner that if the assessment is not paid a lien may be recorded. Then, the owner must be provided a second letter at least 45 days prior to filing the foreclosure lawsuit warning that if the lien is not satisfied (paid-off), then a lawsuit to foreclose the lien may be filed anytime thereafter. For a condominium association the warning/waiting periods for both letters was 30 days. Effective July 1, 2021 this was changed to 45 days.
Material Alterations: Unless otherwise provided in the declaration of covenants and restrictions, a material alteration to a homeowners association’s common area is decided by the board. In condominium associations, material alterations require 75 percent approval of all unit owners unless the declaration provides otherwise.
Official Records Requests: In a homeowners association, official record requests must be made by certified U.S. mail to create the rebuttable presumption the association willfully failed to respond. There is no similar requirement for a condominium association. Every community association should adopt specific rules governing official records requests, how often they can be made, and where they must be delivered. If your association has not done so, you are urged to discuss this with the association‘s lawyer.
Quorums: A quorum of the membership for a homeowners association membership meeting consists of 30 percent of the entire membership unless a lower number is provided for in the bylaws. A quorum for a condominium association membership meeting occurs when there is a majority of the voting interests present unless a lower number is provided for in the bylaws.
Reserve Accounts: A homeowners association only has restricted reserve accounts if initially created by the developer or voted on and approved by a majority of the entire membership. In a condominium association, 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. Condominium boards and homeowners association boards with restricted reserves may propose lower or no reserves to the membership which is subject to approval by a majority of a quorum of the members. However, neither board is obligated to propose lower reserves. A condominium association board and a homeowners association board with restricted reserves must fully fund those reserves in the budget each year as must homeowners association boards whose association has adopted restricted reserves.
Transfer Fees: As per §689.28, Fla. Stat., transfer fees when buying and leasing a home in the state of Florida are prohibited. But, there are exceptions for both homeowners and condominium associations with this caveat. There is no cap, per se, that a homeowners association can charge a prospective member as a part of acquiring their property, but such fee must be authorized in the declaration (or other recorded document). However, as per §718.112 Fla. Stat., a condominium association can only charge up to $150 per applicant. A husband/wife or parent/dependent child are considered one applicant. A condominium association can only charge a transfer fee if it has the authority to approve transfers, and the authority for the transfer fee, specifically, must be set out in the declaration or bylaws (and as set forth above, as of July 1, 2021 it is presently limited to a maximum $150.00).
Warranties: A developer and general contractor of a condominium provides statutory warranties to buyers of units as further detailed in Chapter 718, Fla. Stat. There are no similar statutory warranties set out in Chapter 720, Fla. Stat., for buyers of a home within a homeowners association. A developer of a condominium, pursuant to relevant law, also provides an implied warranty of habitability. As to a homeowners association, §553.835, Fla. Stat., provides in relevant part that there is no such warranty for off-site improvements (i.e., the common areas) with a small exception for the shared components of a townhome type community.
Websites: A condominium association that has a condominium with 150 or more units must host an association website and post certain official records to it. Homeowners associations have no similar requirement.
If you have any questions in regard to these matters be sure to discuss them with an attorney of your choosing.
Tags: Condo and HOA Laws, Management News, Members Articles
Written by admin on December 7, 2019 at 9:59 AM.
If you’re hiring a public adjuster, it’s important to keep in mind that this person is going to be working for you. You’re the boss, so you’ve got to think like a boss. That means interviewing them and asking the right questions. We’ve listed eleven questions that you should ask any public adjuster before you make the hire.
Before we talk about how to hire a public adjuster, let’s talk for a second about why you would want to hire one in the first place. The short answer is that you hopefully will never need to hire one. However, if your home or business is damaged, you’ll need to fire an insurance claim, which means providing the insurance company with an estimate of the damages. If the claim is very large, or if the insurance company thinks they can get away with paying less, they will send an insurance adjuster to draw up their own estimate.
When this happens, you have a few options. You can accept the insurance company’s offer, you can sue the insurance company, or you can hire a public adjuster to make a counteroffer. Accepting the company’s offer isn’t always the best idea. In some cases, you may be asked to settle for far less than the actual cost of damages. However, suing the insurance company can get expensive. They have teams of corporate lawyers, and you’ll end up spending a lot of money on your own legal case. Meanwhile, you’ll receive no funds during the legal process, so you’ll have to repair your home or business and pay your lawyer out of pocket.
A public insurance adjuster offers a great compromise. They can get you a better settlement, and you won’t have to pay out of pocket. For more information, read our guide on when to contact a Florida public adjuster.
There’s nothing wrong with being new to the business. Even the biggest, most prestigious firms once started as a single adjuster opening their own small business. But if someone is just starting out in their own business, you’d expect them to have previous experience working for another firm. If they haven’t, steer clear.
A single public adjuster, even a very well-qualified one, can only be so knowledgeable. A team of adjusters can pool their knowledge and help each other out, leading to better results for their clients.
If you’re in another state, this applies to your state as well. An unlicensed public adjuster isn’t just breaking the law by practicing without a license. They can also put you at risk, since there’s no guarantee that they’re even competent.
For any qualified public adjuster, south Florida hurricanes should be par for the course. But if you’re dealing with an unusual claim – for example, if a car ran off the road and into your living room – you’ll want to know that your public adjuster is qualified to deal with your claim’s quirkier aspects.
A public insurance adjuster should only get paid when you get paid, taking a percentage of your claim. If your adjuster is asking for an up-front fee, don’t do business with them. What they’re doing is unethical.
Depending on your situation, you may still owe money to a mortgage lender, and they’re most likely not going to be patient with you while the insurance company handles your claim. An experienced public adjuster can oftentimes serve as an intermediary to help you deal with your mortgage lender’s demands.
The opposite problem of working with too small a team is working with a big firm that farms out their work to third-party contractors. So you can be paying for a prestigious name, but getting freelance service. Make sure that your public insurance adjuster will be personally involved with your claim.
Some public adjusters prefer that their clients not communicate directly with the insurance company. Others are comfortable to share these responsibilities with their clients. There’s no right or wrong answer to this question, but it’s important that you and your adjuster are on the same page here.
The average person may never need a public adjuster’s services or may need them once or twice at most. If their adjuster did a good job, they’re going to remember it. Ask your prospective public adjuster for references. If they’re not prepared to offer any, scratch them off your list.
Sometimes, in the aftermath of a natural disaster, public adjusters can become overwhelmed with claims from a large number of people. In this case, a qualified, competent adjuster may simply be too busy to give your claim the individual attention it deserves.
Errors and Omissions is the insurance industry’s version of malpractice insurance. It ensures that if your public adjuster makes a mistake that costs you money, they’ll be able to compensate you. Every licensed public adjuster should carry a policy. If they’re not willing to share this information with you, tell them to take a hike.
If you’re hiring a public adjuster in Florida, consider hiring Stellar Public Adjusting. Our qualified adjusters are experienced in Florida home and business claims, and we don’t hire out our work to independent contractors. When your adjuster shows up to create your claim, you can rest assured that this is the same person who will be dealing with the insurance company on your behalf.
Use our web form to contact us today. If you have an urgent problem that requires immediate assistance, call our office at 305-570-3519.
Andria Rosendahl
Public Adjuster
2450 NE Miami Gardens Drive, Suite 200, Miami Florida 33180
Office: 305-396-9110
Cell: 305-710-7922
Fax: 305-873-8719
E: Andria@stellaradjusting.com
W: www.stellaradjusting.com
Check Out Our Blog At: www.stellaradjusting.com/blog/
Tags: Management News, SFPMA Members
10 Tips for creating an HOA budget or Condo Budget
Do a budget – I know this seems like a silly tip, but we have seen many associations fail to create a budget before proceeding to the next year. An HOA is just like any other business or organization. If you don’t have a financial plan, you will find yourself a in a mess about halfway through the year when you realize that you don’t have enough funds to make it through the entire year. Take the time to practice financial responsibility for your association.
Review budget and Financial History – You always want to review the previous two years financials to fully understand were you currently are vs. where you want your association to be . Many people review previous year’s budgets to prepare future ones. One problem we see is that many people despite reviewing past numbers, fail to make the proper budget corrections when something is way over or under budget from the previous year. Make the proper adjustments to insure an accurate budget.
Prioritize projects – We have worked with any HOA and condo associations that get overwhelmed during budget time because they have so many repairs and projects that they want to handle all at once. Any kind of future projects or repairs, need to be prioritized accordingly. This is where you must separate your associations needs vs. wants. Everyone wants the landscaping or condo exteriors to look immaculate, but no one gets excited repairing an unsafe stairwell repairing a leaking sprinkler system. You must eliminate any safety or potential liabilities before exploring any community beatification projects.
Utility Increases – We can’t recall a time in which utility costs actually went down from the previous year in our 25 years plus experience. Water, gas, and electricity costs have been increasing steadily over the last decade, especially water costs over the last 2 years. We always research our local city and municipalities to see if they have a price rate schedule available. For example the City of Austin is scheduled to increase water costs 70% over the next five years. Because we are aware of this price hikes, we obviously budget for them accordingly. If no information is available, we suggest increasing the budget on most utilities between 5% to 7% each year.
HOA budget
Vendor Contracts – You always want to insure the correct budgeting for all of your normal monthly service providers. Don’t be afraid to ask your landscaping company, pool contractor, and even management company, if they plan on changing their current rates. This is also a great opportunity to ask for their updated insurance information to make sure that is good standing as well. Also review current contacts to see if there are any CPI index clauses in their agreement. Nine times out of ten, if they are contractually able to increase their fees, most will do so.
Budget for reserves – All associations should budget for a percentage of all income to go to their reserve or savings accounts. The percentage of income will of course vary depending on your association. The more long term liabilities and obligations you have, the more you should be putting away. We have some condo associations that are putting away as much as 20% of their total income towards long term savings. Condos generally have much larger financial obligations including exterior repairs and upkeep and maintaining private streets and roads. Not budgeting for reserves can lead to be big problems and potentially big special assessments down the road.
Cover your Insurance deductibles – All condo associations need to pay special attention to this one. Make sure you are aware of the deductible levels for different elements of your complex. For example, if your roof replacement deductible is $500.00 per building and you have 20 buildings, then you need then or course you always need at least $10,000 in your reserves to cover that amount. If a disaster or violent storm strikes your area, you want to make sure your association is ready and that you are not hitting them up for a special assessment just to cover basic insurance claims.
Evaluate legal and collection costs – Legal and collections costs can escalate very quickly depending on the collection strategy that you use. Evaluate your current system and see if you can determine your return on investment. If you are on average spending $150 dollars to collect every $100, then something obviously isn’t working. We have experienced great success with providing homeowners that are behind with a payment plan with full payment schedule provided to them. When delinquent association members concentrate on affordable monthly payment and not the large amount that they owe, they tend to see the light at the end of tunnel.
Special Assessments are for special projects – We have heard many times suggested “Why can’t we have a special assessment instead of raising our monthly dues?” This philosophy doesn’t work in our book. If your association is having a problem meeting it expenses because of some tight cash flow, you need to raise your assessment amount or your assessment frequency. Special assessments are just that, special. They are not for paying your bills. They are intended for major improvements, or in a case of emergency repairs, not to pay the pool contractor.
Stay the course – It’s real easy to get distracted throughout the year with landscaping improvements, new and improved security systems, and other random projects throughout the year. Your association made a budget for a reason, so try your best to stick to it as best you can. If you do have to make an unexpected expenditure, take your time and make the best decision for your HOA or condo association.
Creating and maintaining an HOA budget is essential part of maintaining a fiscally responsible association. Even associations that are not as healthy financially as they need to be, with some small modifications, they too can be financially fit in just a short amount of time. If you follow some basic steps and continue to evaluate and adjust over time, your community association will thrive financially now and in the years to come.
Tags: Budgets & Finance, Condo and HOA Budgets, Management News
In many ways, the managing and operating of a condominium association is akin to operating a business. A primary similarity is the importance of careful and accurate financial planning and budget preparation. The board of directors of an association has fiduciary duties to its members. By paying close attention to the legal and technical requirements of condominium association budget preparation, the association can better assure its members of a smooth-running fiscal year ahead.
The legal and technical requirements of condominium association budgets can be found in Chapter 718, Florida Statutes (the “Condominium Act”) and Section 61B-22 of the Florida Administrative Code. An association’s bylaws may also contain certain financial requirements to which a board and/or budget committee should pay attention. Although the statutory and code requirements apply to all condominium associations, there is no one-size-fits-all for budget preparation. The intricacies of the budget will differ based on a number of factors, such as the size of the condominium, ongoing and upcoming projects, various maintenance obligations, etc.
The budget will cover one fiscal year, which typically tracks the calendar year. However, the association’s bylaws may indicate a different twelve-month period as its fiscal year. The important part is knowing when the fiscal year begins so that the board can ensure plenty of time for planning. For example, many associations which have a fiscal year that follows the calendar year begin planning their budget in the summer months in order to have a proposed budget by November. An additional time requirement to be aware of is that any meeting at which the proposed budget will be considered requires 14 days statutory notice.
However, your association bylaws may require a longer notice, such as a 30 days’ notice of a budget meeting. If your bylaws require a longer notice (such as 30 days) rather than the statutory 14 days’ notice, you must follow the bylaw notice requirement. The notice must include the date, time, and location of the budget meeting as well as a copy of the proposed budget. The completed notice must also be posted in a conspicuous location on the property at least 48-hours before the meeting. Although the budget meetings must be opened to all members, the board is generally authorized to adopt the budget without a vote of the owners.
As for what goes in the budget, it is divided into two main sections: an operating budget and a reserves budget. Again, similar to a business, an association’s operating budget displays the costs of the day-to-day operations of the association. This means that this section reflects reoccurring monthly and annual expenses. The operating budget may include, for example, expenses for management fees, recreational facilities rent, insurance, and taxes. There are certain items that must be contained in the budget pursuant to Section 61B-22 of the Florida Administrative Code, such as the beginning and ending dates of the period covered by the budget, all estimated common expenses or expenditures of the association including the categories set forth in Section 718.504(21)(c), Florida Statutes, and other items.
The total assessment for each unit type according to the proportion of ownership should also be included in the operating budget, either on a monthly basis or for the period for which assessments will be due (e.g., if the association collects quarterly assessments). A key point to remember about the operating budget is that the money budgeted is not restricted to the particular purpose specified on the adopted budget. If necessary, the association board may use its business judgment to spend money designated for one purpose for other purposes.
The second section of the association’s budget is the reserves budget. The Condominium Act requires the association to maintain reserve accounts for capital expenditures and deferred maintenance. A capital expenditure is the purchase or replacement of an asset whose useful life is greater than one year. Deferred maintenance is any maintenance that is performed less frequently than a year or results in maintaining the useful life of an asset. This is distinguishable from routine maintenance, which needs to be included in the operating section of the budget.
The Condominium Act also specifies that the reserves must include roof replacement, building painting, and pavement resurfacing, regardless of the amount of the maintenance or replacement cost. The association is also obligated to include any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. Unlike the operating funds which are not restricted to a particular purpose, reserve funds must be used for their intended purpose, unless a majority vote of the members is obtained to use the funds for other purposes. This means that the board cannot use reserve funds designated for one purpose to cover an unexpected expense without an approval vote.
Although as stated above, a board generally has the authority to adopt the budget without a vote of the membership, the Condominium Act does provide the members with two exceptions. First, the members can vote to waive reserves or partially fund reserves. The board can put the reserves question up to a vote if it so chooses. If no vote to waive or partially fund reserves is taken or not enough members vote to do so, the board must adopt the budget with fully funded reserves.
The second time at which a membership’s vote may be taken is if the board adopts an annual budget which requires assessments exceeding 115 percent of the assessment. At least 10 percent of the members must submit a written request for a special meeting of the owners to consider a substitute budget within 60 days after the adoption of the annual budget. A proper meeting notice must be sent out, and a membership meeting will be held. If there is not a quorum present at the meeting, or if the substitute budget is not adopted, the previously adopted annual budget remains in effect.
The ins and outs of preparing a condominium association budget can be complex, and association counsel should be consulted when needed. The board should begin early to assess the current financial picture of the community as well as its long-term financial needs and goals.
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Karyan San Martano is a member of Becker’s Community Association practice and regularly provides legal counseling to the officers and directors, as well as the property manager, on the operation of condominiums, cooperatives, and homeowners associations. To learn more about Karyan, please click here.
Tags: Budgets, Management News
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