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A not-for-profit corporation can earn profits

Not-for-profit, yet it can earn profits

Q: Would you explain the difference between "not-for-profit" and "nonprofit" corporations? Also may a not-for-profit HOA hold events to earn money for the association? If so, does this money go into the reserve account?

A: First, let's talk about the two corporate statutes in Florida, F.S. 607 and F.S. 617. F.S. 607 is the statute governing for-profit corporations; F.S. 617 is the statute for not-for-profit corporations. Don't be misled by the names, however; both types of corporations can earn profits. The rudimentary difference is that the not-for-profit corporation cannot pay profits or dividends to the members; a for-profit corporation can. A nonprofit corporation must be registered with the Internal Revenue Service, have a nonprofit IRS certificate and file a tax report as a nonprofit corporation each year. As for making a profit on socials, as long as it does not conflict with the documents of the association, the association can make a profit.

Managing services in delinquent units

Q: I live in a condominium association that has a master association and several smaller sub-associations. Our units have services that are supplied by the condominium and are paid by our fees. One of the services is water, but it is metered and charged in a separate invoice. Does the association have the right to shut off those services for units that are delinquent?

A: Florida Statute 718.106 says that an owner is entitled to the exclusive possession of his or her unit and an undivided share in common units or common surplus. In the matter of a delinquent unit, the matter should be turned over to the association attorney. The board cannot just terminate services.

How, or if, to budget uncollected funds

Q: I am the treasurer of a condo association. We have two units at various stages of foreclosure. I presume these owners will not pay their assessments. Upon receipt of the foreclosure notices, we immediately turned them over to the accountants and our attorney. In preparing our budget, do you recommend we provide for the possibility of uncollected funds? If so, how much should be budgeted? Is there a formula that is appropriate?

A: I would first talk to your accountants and get their advice. Create a line item called "bad debt" and calculate the fees you estimate will go uncollected. There is no formula; the best you can do is estimate. You should not leave the budget short, and be sure to make the other owners aware of the delinquent account.

Water damage? You won't like this answer

Q: I live in a first-floor condominium unit. Recently, my unit suffered water damage from a broken water pipe from the unit above me. I had water damage to my ceiling, walls, kitchen cabinets and carpet. Who is responsible for repairs?

A: Typically, if the leak was caused from a noncommon pipe, the upstairs owner would be responsible for repairs to the pipe and damage in his unit. The unit below would be responsible for repairs in that unit. The association would be responsible for the replacement of unfinished drywall. If the pipe was a common area pipe, the association would only be responsible for the pipe repair and the drywall replacement. You need to file a claim with your insurance agent.

Roofer causes haywire in air conditioner wiring

Q: A unit owner has submitted a repair bill for his air conditioner to the board. His air conditioner located on the condo roof stopped working when workers were recoating the roof. The repair company charged $80 to reconnect a low voltage line they say became disconnected by rough treatment. The roofers did raise the air conditioner a few inches to coat underneath. Is the payment of this bill the responsibility of the condo association? We have been advised not to pay this bill.

A: The new condominium law does require the association to have some responsibility for unit air conditioners. It does not require the association to pay for wear and tear or usage but if the roofer damaged or failed to properly replace the AC, then the association and the contractor would have some responsibility. The board should talk to the contractor and ask him to refund the money if his workers failed to properly reconnect wires.

Richard White is a licensed community associations manager. Write to him at 6039 Cypress Gardens Blvd., No. 201, Winter Haven, FL 33884-4115. Please include your name and city.

A not-for-profit corporation can earn profits 07/02/10 [Last modified: Friday, July 2, 2010 5:30am]
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