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Q&A | Community living

Budget shortfall leads to special assessment

Q: Can a board of directors approve a special assessment simply to balance a budget? The members have been assessed what amounts to an additional quarter because the new board members have determined that there is a shortfall. Is not the full membership vote required for any assessments not deemed an emergency by the governor?

A: Budgets are not written in stone. They can be changed by the board at any time with proper notice to the members. The budget was created as an estimate of coming expenses for the next year. Sometimes the budget is underestimated and must be recalculated. Since the board has the responsibility to maintain the common areas and operate the association, they alone have the power to assess the members. There are two exceptions where the members can vote to reduce assessments. The first is to vote to reduce the reserves and the other is if the expense budget is 15 percent higher than the previous year's budget. In both situations it is not up to the board to call a vote for the members, as the members must themselves call for the special members meeting. The board can vote on any budget increases to meet necessary expenses and at any board meeting that is properly called and noticed.

Let vote speak

Q: What repercussions can a homeowners association legally incur for failure to provide the end-of-year financial statements to the homeowners?

A: Condominium owners can report the failure of the board to produce an end of year financial statement to the state. Homeowner associations (HOA) do not have a state agency. The only recourse for HOA members is to file a lawsuit. Rather than spending money on a lawsuit, I would suggest that the members vote out the board and replace them with members who will recapture the financial information and print proper reports.

Parsing term limits

Q: I am president of our homeowners association and our governing documents specifically state that no director may serve more than two consecutive two-year terms. There seems to be a feeling among some of our past directors that they can stay out of office for a year and then be eligible to run again. Do you have any thoughts or opinions on this?

A: Please understand that I cannot render an interpretation of your documents. In past associations that had similar wording in their bylaws, directors were allowed to come back to serve if they sat out a year. This is unlike our U.S. Constitution Amendment 22, ratified in 1951, which says no person shall be elected to the office of president more than twice. The section you quoted mentions the word "consecutive,'' which seems to differ in the meaning from our Constitution. You should review the new change to the 2008 Florida Statues 718.112(2)(d)1 concerning this question.

Uses of reserve fund

Q: I have read in the statutes that reserves are not for regular expenses, but special ones like roofs, painting and paving. Would a reserve fund be valid for insurance?

A: Since insurance is an annual expense, it should be in the regular expense budget and not in the reserves. Reserves are usually for expenses that are not an annual expense but will occur in future years. However, you could include an insurance reserve line item to pay for deductibles that would only be needed in event of a claim or loss in future years.

Richard White is a licensed community associations manager. Write to him at 6039 Cypress Gardens Blvd., #201, Winter Haven, FL 33884-4115. Sorry, he can't take phone calls or provide personal replies by mail, but you can e-mail him at CAMquestions@cfl.rr.com. Please include your name and city. Online: talkwithcam.com.

Budget shortfall leads to special assessment 09/26/08 [Last modified: Wednesday, November 3, 2010 1:26pm]

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