By Ryan D. Poliakoff / Published October 2017
I live in a 125-unit condominium. In the annual financial reports we receive under “expenses” for the year, there is never any mention of the salaries being paid to employees or the benefits they receive. According to the law, are we as owners entitled to that information?
Under the current law, this is an unsettled question. In general, as an owner, you are entitled to inspect most association records, and that includes financial records. However, several years ago an amendment to the Condominium Act provided that “personnel records” of association or management company employees, including payroll records, are not subject to inspection. However, the exception does not include written employment agreements with an association employee or management company, or budgetary or financial records that indicate the compensation paid to an employee—those records are still subject to inspection. So, on the one hand, payroll records are not inspectable records, but on the other hand, contracts and other financial records that indicate the compensation paid to an employee are inspectable. Was the legislature’s intent to protect salary information in general? Or, was the legislature instead concerned about some specific information that may be found in payroll records such as social security numbers or income tax information?
Because budget and financial records that indicate the compensation paid to an employee remain inspectable, you may want to request to inspect certain broad categories of documents such as the management contract, any employment contracts, the general ledger (which is more than just a budget, but actually a ledger showing all of the year’s expenses and how they were categorized), the bank statements, the check register, and any other correspondence or records that might reflect the employees’ salaries, but which records would not constitute “payroll” records.
Alternatively, you could try sending the board an inquiry by certified mail specifically asking it to provide you with the salaries of certain employees. By law, the board must respond to such an inquiry within 30 days; this time period is extended where the board requests advice from the Division or the association’s attorney. The problem, however, is that there is very little penalty if the association simply ignores your inquiry. The statute provides that, if your inquiry goes unanswered, the association would be unable to recover its legal fees in the event of a lawsuit arising out of the inquiry. However, it’s difficult to see what type of lawsuit would arise out of an inquiry regarding the salaries of association employees in the first place, and so there would be little incentive for the board to respond.
We live in a community with 49 single-family homes. Our HOA documents specify that each owner is responsible to maintain the exterior of their homes, including painting and roof cleaning. We pay into reserves for these future expenses, but have never been provided the formula used to compute the monthly contribution from each owner. We have requested this information, and we were advised that a reserve study would be conducted in 2018. That does not provide owners transparency for current and past payments and expenses. Can you address the issues of reserves and formulas as specified in Florida’s HOA statute?
Florida’s HOA Act (Chapter 720) provides that an association may collect reserves for deferred maintenance and capital expenditures for which the association is responsible. Whether or not those reserves are mandatory depends on how they were established. If a reserve fund was established by the developer or by a membership vote, it is officially a statutory reserve and must be collected annually unless waived by a membership vote. Also, the funds may not be used for non-reserve purposes unless an alternative use is approved by the membership.
However, the board of directors of an HOA has the right to establish a voluntary reserve, and in that case, the board controls the amounts collected and the ultimate use of those funds (although the board would be limited by any provisions in the governing documents that limit increases in assessments, generally).
Your question states that each individual unit owner is responsible for maintaining his or her own home, but that the members are paying into a reserve for such repairs. Those statements appear mutually incompatible. Reserves are collected for common expenses, not individual expenses. I question, therefore, why you would have reserves to cover these expenses in the first place. It is more likely that reserves would be collected for common expenses such as the future refurbishment of a guardhouse or the replacement of a clubhouse roof. I would suggest that you first try to determine how and when your reserves were established and by whom. Perhaps the minutes of board or membership meetings would shed light on the intended purpose of the reserves. You could also request to inspect association records and see if there is an old reserve study that was performed at the time the reserves were created. Further, if the association is going to be conducting a reserve study next year, then it presumably knows at least what items will be part of that study. That is, you don’t need to know the exact formula by which the reserves are calculated—you just need to know what items are included in the reserves so that you can evaluate whether the reserves are proper in the first place.
Ryan D. Poliakoff
Partner of Backer Aboud Poliakoff & Foelster