Condominium budget preparation issues
It is that time of year when Condominium Associations start working on preparing their budgets for 2021. Usually a small committee or the board will have a “workshop” to come up with a preliminary budget and later in the year the board will vote on the final budget.
We are often asked whether this budget workshop can be a closed meeting as the board is not yet voting on the meeting. Although there are many good reasons to keep such meetings small, notice of such meetings must be posted on the property at least forth eight (48) hours before the meeting and members have a right to attend such workshop meetings.
Section 718.112(2)(c), Florida Statutes, requires that: “Adequate notice of all board meetings, which must specifically identify all agenda items, must be posted conspicuously on the condominium property at least 48 continuous hours before the meeting except in an emergency. . . . Meetings of a committee to take final action on behalf of the board or make recommendations to the board regarding the association budget are subject to this paragraph.”
Now when it comes time to approve the final budget once it has been determined after the workshop meeting, a copy of the proposed final budget along with copy of notice of the board meeting to approve same must be delivered to the unit owners at least fourteen (14) days before the board meeting.
Section 718.112(2)(e), Florida Statues, states that: “Any meeting at which a proposed annual budget of an association will be considered by the board or unit owners shall be open to all unit owners. At least 14 days prior to such meeting, the board shall hand deliver to each unit owner, mail to each unit owner at the address last furnished to the association by the unit owner, or electronically transmit to the location furnished by the unit owner for that purpose a notice of such meeting and a copy of the proposed annual budget. An officer or manager of the association, or other person providing notice of such meeting, shall execute an affidavit evidencing compliance with such notice requirement, and such affidavit shall be filed among the official records of the association.”
In addition to the estimated operating revenues and expenses, the proposed annual budget must include reserve accounts for capital expenditures and deferred maintenance. Pursuant to Section 718.112(2)(f), Florida Statutes: “These accounts must include, but not be 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. The amount to be reserved must be computed using a formula based upon estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item.” The Association may use a straight line or pooled method for determining a fully funded budget. Utilizing the pooled method usually decreased the amount of reserve assessments required in a fully funded budget as reserve funds are calculated to be needed just in time when the line items are need to be paid for.
A fully funded reserve budget must be adopted by the board unless a majority vote of the membership vote to provide for no reserves or less reserves than fully funded. In order to take this membership vote, the board should present a budget with fully funded reserves to the members along with an alternative budget will less than fully funded or no reserve funding. Such a vote can be taken at a special membership meeting immediately before the board meeting to vote on the budget and would also require a fourteen (14) day notice of the special members meeting.
The proxy question asking the owners to approve less than a fully funded reserve budget must state in large font: “WAIVING OF RESERVES, IN WHOLE OR PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.”
