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Community living: Members can sue board for not funding reserves

Members can sue board for not funding reserves

Q: I have a question about specified reserves (roof replacement, painting and paving). Our association treasurer refuses to fund these reserves per the board of directors' approved budget for the past two years. This a concern to the members of our association and at this point we are not sure what to do. Can you advise us on what action we can take? I heard there is a state auditor but we are not sure if that would be the best course of action.

A: Accounting procedures are not necessarily an investigation problem for the state unless there is fraud or criminal activity. However, failure to fund reserves is a violation of the statutes involving condominiums (not HOA) and the state can impose a fine for the condominium.

Your problem is more local in that your board is responsible to fund the reserve accounts as this responsibility is not limited to the treasurer alone. If the reserves are not being funded, then your board is failing and can be sued by the members.

The situation can be simply resolved by electing directors who will approve a proper budget with proper reserves and then fund the reserve accounts. A quick answer is for the board to instruct the treasurer to fund the reserves and if he does not, then at the next board meeting appoint a new treasurer. The answer is that the board has the responsibility and the members have the power to elect directors who will comply with statutes and your documents.

No statute limits increases in assessments

Q: I am told that, under Florida law, our HOA assessments cannot be raised more than 15 percent in any single year. True or false? If true, to what agency do I go to stop them from taking multiples of 15 percent? It seems ludicrous to hire a lawyer for this.

A: There is no statute limit for increases in fees. If you think about it, a limit can create maintenance and operational problems that will decrease unit/home values. The statute requires the board to maintain the common areas and properly operate the association.

They are also required to prepare an adequate budget that includes proper reserves to meet these needs. The 15 percent is listed in the condominium statute but it is not a limit of increase. It says that if the expense section, not including reserves, increases 15 percent, then the members can vote a new expense budget.

For HOAs there is no state agency to report board violations. I will warn you that due to current Federal Reserve actions, you may be faced with higher inflation. Thus, you should expect that your fees will continue to rise in future years.

Proper budget with adequate reserves is required

Q: Our condominium had a reserve study performed in 2009, yet the budget for reserves was based on the old reserve study. We are currently underfunded by approximately $500,000. There are members who wish to challenge the study's amount and the proposed budget. They would like to get quotes from contractors. Can this be done by the owners? Would we need to get a new study? I propose we request an amendment from the engineer who performed the study in an effort to minimize the expense of a new study. We only have partly underfunded reserves as the members voted to waive 2010 reserves. Now, we are behind the eight ball with reserves and budgeting for 2011.

A: Expense budgets with proper reserves are critical. But, it is difficult to produce a budget that increases fees with many owners living on reduced incomes, if any at all, in this economy. Like the old saying, you are between a rock and a hard place. The statutes are very clear that the board has a responsibility to prepare a proper budget with adequate reserves. Directors do not have a choice to reduce these requirements just because some of the members are economically unable to pay.

Failure to produce an adequate budget with proper reserves is a breach of duty. I do not think a new study would solve anything unless you think the report was flawed. More than likely the engineer who did the first study would be the least costly if you want a new study.

Board of directors must deal with parking problem

Q: I am an owner in a condominium where two parking spaces are designated for visitors. The board recently contracted a management company to run the building. My issue is that of the two spaces, one has been occupied by a vehicle that has not moved in at least three months. No one knows who owns the car.

The other space is appropriated by a resident-owner who puts a sign on the window saying reserved and an apartment number. I have been dealing with the individual assigned to the building from the management company for weeks and his last communication stated that he was going to take it to the board.

Can I have the vehicles towed? What other recourse do I have?

A: Parking is always a problem. Your situation must be addressed by the board of directors — not the manager. I would suggest that you send a letter to the board of directors and ask them to discuss the matter at the next board meeting. The board could create a parking policy that covers these two spaces.

No, I would not suggest that you as an owner-resident tow any car. That would be a board's responsibility to instruct the manager to take such action. FS 715 covers towing requirements that the board must establish and follow. That would be part of the policy that I suggest the board approve. It may be necessary to have the association attorney review the policy or make suggestions.

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.

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leg.state.fl.us

Community living: Members can sue board for not funding reserves 12/17/10 [Last modified: Friday, December 17, 2010 3:30am]

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