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HOA Rules to be Recorded

Do My HOA’s Rules Have to be Recorded?

For many years, homeowners’ associations (HOA) were only required to record their rules and regulations if their governing documents required that they be recorded. As of July 1, 2018, that is no longer the case.

Section 720.306 was amended by the Legislature to address the manner in which amendments are carried. The amendment adopts much of the same procedure of underlining and strikethroughs used in condominium covenant amendments. If the amendment is extensive such that underlining and strikethroughs would lead to confusion then the amendment must include the following notation “Substantial rewording. See governing documents for current text.” and underlining and strikethroughs are not needed. §720.306(1)(e), Fla. Stats.

You may however wonder what this requirement has to do with an HOA’s rules and regulations. The change to Section 720.306(1)(e) requires the use of underlining and strikethroughs (with the exception noted above) and recording for all amendments to the “governing documents.” A term defined by Section 720.301(8) to include the declaration, articles of incorporation, bylaws and the Association’s “rules and regulations adopted under the authority of the recorded declaration, articles of incorporation, or bylaws and all adopted amendments thereto.” §720.301(8)(c), Fla. Stats. (emphasis added). This means that in order for rules to be amended in the HOA setting, they must be typed a certain way and the amendment itself will not take effect until “recorded in the public records of the county in which the community is located.” §720.306(1)(e), Fla. Stats.

 

Marilyn Perez-Martinez

Attorney at Law, Becker
Miami | bio

 

Can My Association Board Pass a Rule Regarding That?

Can My Association Board Pass a Rule Regarding That?

You attend your association’s monthly board of directors meeting because you notice an item on the agenda that piques your interest. The board of directors is scheduled to consider and pass a rule regarding _________ (you fill in the blank).  You ask yourself “Can they do that?”  The answer, as it is many times, is “it depends”.

The first place to look is the association’s governing documents.  The governing documents (declaration, articles of incorporation or bylaws) must give the board of directors the authority to promulgate rules and regulations.  If this authority is not contained anywhere in the association’s governing documents, then the board does not have the authority to promulgate or amend rules and regulations.

If the authority does exist in the governing documents, then the board has the authority to promulgate reasonable rules and regulations.  Again, you must look to the governing documents to see if such rules must also be approved by the membership.  While not common, some association documents do require membership approval, so be sure to check your documents for such a requirement.

Assuming that the board can pass reasonable rules without membership approval, how does that work?  There are essentially two categories of cases in which an association attempts to enforce rules of restrictive uses. The first category is dealing with the validity of restrictions found in the declaration. The second category involves the validity of rules promulgated by the board of directors.

Restrictions found in a declaration are clothed with a very strong presumption of validity which arises from the fact that each individual unit owner purchases his unit knowing of and accepting the restrictions to be imposed. White Egret Condominium, Inc. v. Franklin, 379 So.2d 346 (Fla. 1979).   As such, a use restriction in a declaration may have a certain degree of unreasonableness to it, and yet withstand attack in the courts.

However, where a rule is created by the board of directors, such rule is subject to a test of reasonableness.   If a rule is reasonable, the association can adopt it, if not, it cannot.  Hidden Harbor Estates, Inc. v. Norman, 309 So.2d 179 (Fla. 4th DCA 1975). What this means is that if a rule is challenged, the association must be able to show the rule is reasonable.  The challenging owner is not required to show the rule is unreasonable; the burden is on the association to show that the rule is reasonable. 

In addition to being reasonable, there are other limitations on board enacted rules.  A board enacted rule cannot be in contradiction with any other provision of an association’s declaration, articles of incorporation or bylaws.  Any conflict between a provision in an association’s rules and regulations and an association’s declaration, articles of incorporation or bylaws will be resolved against the rule and in favor of the provision in the declaration, articles of incorporation or bylaws.

Furthermore, a rule cannot amend a provision of the declaration.  Unfortunately, many associations attempt to do just that by passing rules that, if challenged, would not be upheld by the courts as a valid rule.  For example, if your governing documents provide that owners who want to sell or lease their unit must provide a copy of the sales contract or lease to the association, and nothing more, a rule that provides sales and leases must be approved by the association would not be upheld by a court if challenged. 

Similarly, if your governing documents do not include restrictions limiting leases to no less than 3 months, or that leases must be at least one year in length, the board cannot pass a rule to that effect.  Such restrictions must be in the declaration, unless, arguably, the declaration specifically grants the board the authority to pass additional rules and regulations regarding leasing.

Also, you should be aware that there is now a difference regarding rules and regulations in what the defined term “governing documents” means in regard to a homeowners association as opposed to a condominium association.  Chapter 720, Florida Statutes (the “Homeowners Association Act”) was amended to include an association’s rules and regulations in the definition of an association’s “governing documents”.  See Section 720.301(8), Florida Statutes.  Chapter 718, Florida Statutes, (the “Condominium Act”) does not contain a similar provision or definition.  So while the defined term “governing documents” includes rules and regulations in a homeowners association, the same defined term does not include rules and regulations in a condominium association.

Finally, whenever an association is considering amending or addition rules and regulations, it should always do so in consultation with its attorney.  The attorney should review the rule to make sure it is not in conflict with any provisions of the declaration, articles of incorporation or bylaws; make sure there are no potential housing law issues or other legal issues in regard to the proposed rule and that the proper meeting notice requirement for the board to consider and pass the rule are followed.  In condominium, homeowner and cooperative associations, written notice of any meeting at which amendments to rules regarding unit (or parcel) use will be considered must be mailed, delivered, or electronically transmitted (to those who have consented in writing to receive official association notices electronically) to owners and posted conspicuously on the property not less than 14 days before the board meeting.

 

Howard J. Perl, Esq.

Shareholder, Becker
Fort Lauderdale | bio

 

water leak

The Subrogation Situation

With increasing frequency, insurance companies that provide unit owner insurance are suing community associations to recover payments made to the unit owner that are related to water leaks in the unit. The problem with these lawsuits is two-fold. First, the insurance companies are waiting years to bring them, although still within the statute of limitations for the lawsuit, but nonetheless to the detriment of the community association’s defense of the case as records and memories fade overtime. Secondly, the cases are many times brought in small claims court as a result of the insurance company seeking at most $5,000.00 in “reimbursement” from the community association. The issue with defending a small claims court case is that the cost of defending the lawsuit can be more than the amount the insurance company is seeking which puts pressure on the community association to simply settle. The basis of the insurance company’s lawsuit against the community association is negligence; the insurance company claims that the association had a duty to take some action, failed to take the action and such a failure led to loss that resulted in the insurance payment to the unit owner.

What can be done to limit a community association’s exposure to such lawsuits? First, the community association should consult with its attorney to determine if an amendment to the declaration for the association should be adopted related to subrogation. Next, community associations need to promptly respond to complaints related to leaks and properly document repair work in a detailed manner so that the location and extent of work is easily understood. The documentation related to repair work should be kept for 7 years and be readily accessible. Community associations should perform routine maintenance and inspections of property that the association is required to maintain in order to identify in advance of a water leak areas of needed maintenance. Lastly, anytime there is a water leak or other casualty to unit, the association must thoroughly document, in writing, what happened to cause the leak, what was done in response to the leak and all communications between the association, the unit owner and the unit owner’s insurance company and adjuster. Such documentation should be shared with the community association’s attorney and kept in the association’s official records.

 

Marielle E. Westerman

Marielle E. Westerman

Construction Law Attorney, Becker
Tampa | bio

 

electronic voting

Does Electronic Voting For Community Associations Really Work? How Do You Implement?

Q: I heard that the law in Florida recently changed and that owners in community associations can now vote electronically. What is required to implement electronic voting in my community?  And does it really work? A.A. via e-mail

A: You heard correctly. During the 2015 Legislative Session, a new law was passed authorizing condominiums, cooperatives and homeowners associations to conduct elections and other owner votes through an internet-based online voting system. In the spring of 2016, the Department of Business and Professional Regulation adopted administrative regulations to implement the new electronic voting statutes for community associations.

The first step is for the Board to decide if they wish to offer electronic voting to their members by adopting a resolution. The resolution will establish the procedures and deadlines for owners to consent to electronic voting and, thereafter, opt out of electronic voting (if desired). Written notice of the board meeting at which the resolution will be considered must be mailed, delivered, or electronically transmitted (where an owner has consented in writing to receive official notices by e-mail) to the owners, and conspicuously posted at least fourteen (14) days before the meeting.

The next step is for the Board to select an operating software system to utilize and administer the electronic votes. The administrative regulations require the use of sophisticated operating software which will enable the electronic voting website provider to accurately tally votes and be able to defend the result. The operating software also needs to be able to preserve the secrecy of owner votes in the election of directors. There are several different vendors who offer operating software to community associations for a fee. Most of the vendors utilize a similar electronic voting format: (1) the association provides a roster of eligible voters, (2) a unique PIN number is sent to the e-mail address provided by the owner, (3) owners are asked to create a user name and password to log on to the website; and (4) the owner votes electronically.

The Board does not have the right to force owners to vote electronically. Owners have the option to decide if they wish to vote electronically. Owners who do not consent to vote electronically must still be permitted to vote the “old fashioned” way via paper. At the membership meeting the electronic votes and the paper votes are tabulated together and the voting results announced.

Electronic voting does work. Several of my association clients have successfully used electronic voting at their meetings and elections. I predict that electronic voting will become commonplace very soon. The days of shuffling through stacks of paper at association annual meetings may soon be over.

 

David G. MullerDavid G. Muller

Board Certified Condominium and Planned Development Law Attorney, Becker
Naples | bio

 

 

Material Alterations to lobby

Material Alterations

We receive numerous questions from our condominium association clients regarding proposed “material alterations” to the common elements. In general, the board is empowered with authority to maintain the common elements. However, certain changes to the common elements may be considered a “material alteration” which may require unit owner approval. Florida courts have held that a material alteration is one which “palpably or perceptively varies or changes the form, shape, elements or specifications” of the common elements “in such a manner as to appreciably effect or influence its function, use or appearance.” Sterling Village Condominium, Inc. v. Breitenbach, 251 So.2d 685 (Fla. 4th DCA 1971). In many instances the material alteration questions we receive pertain to redecorating common elements, such as a lobby area. If the change in the new décor theme of the lobby is considered a material alteration (as opposed to routine maintenance/replacement), approval of the unit owners may be required. Section 718.113(2)(a), Florida Statutes, requires 75% of the total voting interests to approve a material alteration unless the declaration provides for an alternative approval method/standard. Many condominium association declarations contain a provision which specifically establishes a unit owner approval standard for material alterations to the common elements. Other governing documents specifically carve out exceptions whereby the board of directors alone can approve certain material alterations without the need to obtain unit owner approval. For example, many governing documents will grant the board discretion to approve a material alteration if the cost of said alteration is below a specific dollar amount. This area of condominium law is complex and there are additional considerations which may impact the ultimate analysis (e.g. what if the alteration is required to comply with code, etc.), which are beyond the scope of this article.

 

David G. Muller

David G. Muller

Board Certified Condominium and Planned Development Law Attorney, Becker
Naples | bio

 

 

rental-agreement

Are HOA Owners “Grandfathered” In from New Rental Restrictions?

The Florida Condominium Act states that an amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their unit after the effective date of the amendment.

There is no similar provision contained within the Florida Homeowners’ Association Act. The amendment to the condominium statute was the legislature’s reaction to a Florida Supreme Court case which held that because condominiums are a “creature of statute”, unit owners take title to units knowing that most of the legal rights under their condominium documents can be changed by amendment. Homeowners’ associations are subject to slightly different legal principles including how courts review amendments to covenants and restrictions. I am of the opinion that there are generally no “grandfathered rights” in the HOA context, but the language of individual governing documents plays a large role in the analysis of this issue. This means an HOA should always have an attorney review the governing documents for that community if rental restrictions are being considered.

David G. Muller

David G. Muller

Board Certified Condominium and Planned Development Law Attorney, Becker
Naples | bio

 

 

construction-deposit

Construction Deposits, A New Reality to be Managed

For many condominium and homeowners’ associations, 2019 will be a year to consider long overdue construction projects.  The 2018 legislature made it clear to condominium associations that if the project resulted in a modification of the common elements, a prior vote of approval by the membership is required.  Also, some projects will require bids per statute, while most associations will attempt to seek bids as a matter of good business practice.  Unfortunately, the construction industry is dealing with a labor shortage that may result in fewer contractors willing to bid on your project and many contractors seeking an “up front” payment in the form of a “deposit”.

Anyone seeking construction services in today’s expansionary period knows well that contractors are in high demand, and are taking liberties with respect to what they can require as a condition to entering into a construction contract.  There is no doubt that contractors have taken advantage of the lack of supply and the high demands for construction work.  In that regard, the demand for payment of initial deposits has resurfaced as a reoccurring theme.

The last time the construction industry experienced a boom, contractors were asking for advance payments for everything from materials to excessive and increasing labor costs.  Associations, often times, plagued with little options, have succumb to the contractors’ demands for deposits. Although, deposits, that are often well planned and based on logical procedural requirements, they can be minimized as a risk to the association, deposits are still nonetheless susceptible to difficulties.

In the context of a condominium or homeowner association, the issues with deposits are no different.  As practitioners who represent such entities, we have seen a significant uptick in the demand for deposits.  Often times, the deposits are substantial demands, seeking upwards of prepayment of 20% of the contract sum.  When contracts are in the hundreds of thousands of dollars, this could mean significant upfront cash that is given to a contractor with little to no protections often being provided in exchange.

Such unprotected at risk spending can lead to difficulties.  Often times, it is difficult for an association to know whether or not a contractor is financially solvent.  Even in the most expansive and lucrative economies, there are still contractors who have managed to fail in their ability to control the purse, and often fall prey to needing cash from one project to pay another.  Quite often, associations negotiating with such contractors have no idea of the financial straits of the contractor, and are prone to agree to such deposits without appreciating the risk.  Unfortunately, once funding for a deposit is provided to an insolvent contractor, there is typically little recourse or means of recovering those funds from the insolvent contractor.  Unless the association implements certain guidelines protecting such deposits, the associations can often find themselves having to pay twice for such work.

The payment of advance deposits also place havoc with associations’ obligations to make proper payments under the Florida Construction Lien Law.  Although the Lien Law does not specifically address the issue of deposits, the Lien Law does impose certain obligations on associations to assure payment to those subcontractors who may have performed work and improvements on the associations’ property, under a general contractor.  In those cases, where a subcontractor issues its Notice to Owner, the contractor has obligations to assure payment is made to the subcontractor while making payments to its general contractor.  In the case of a deposit, the association has no idea who the subcontractors may be who are looking toward the contractor and the associations’ payments for funding.  When deposits are issued preliminarily on a project, the association has no idea which subcontractors will be performing the work, and how to protect those funds from not being absconded from the subcontractors.  Hence, there may be certain circumstances where the issuance of a deposit violates the association’s obligation to see that the subcontractors are paid, and may open the door to the association having to pay twice for the same work.

Often times, associations need to use the power of the purse to control the contractor and to bring about compliance with the construction contract.  However, in situations where a substantial deposit is issued, the association’s leverage is eroded by the amount that it pays over and above the value of work in place.  As a result, a deposit typically represents an initial overpayment to the contractor.  As more and more cash is provided to the contractor, the contractor gains leverage over the association.  This is a situation an association must avoid, as the association’s control over the purse is the primary power an association has over the contractor.  Therefore, a substantial deposit at the beginning of the project could essentially prevent an association from having the leverage needed to bring about compliance by the contractor at the end of the project.

The foregoing does not mean that deposits are completely out of the question.  Deposits can be managed, as long as the use of those deposits are memorialized in the parties’ contract.  Often times, construction attorneys add provisions that specifically address how the deposits will be used and accounted for.  In such cases, the deposits could be earmarked to be used strictly for the payment of advance material purchases.  In those circumstances, the contract can dictate specific procedures on how the contractor contracts for the materials, while the association makes direct payment to the supplier.  This type of arrangement alleviates any concerns of liens or suppliers not being paid, and provides the association assurances that once the payment are paid, the materials are owned by the association and therefore liens are of no further concern.  The issue becomes more complicated when the contractor seeks a deposit for advance manpower costs or similar expenses.  Since manpower is a much more nebulous issue for the association to oversee, it is advisable that the association does not agree to such advance payments, as there are few means of effectively controlling same.

Notwithstanding the above, there are means other than deposits to relieve the contractor’s concern of being the bank.  Mobilization line items in a schedule of values in the contract can provide the interim relief that contractors seek.  In some cases, construction contracts allow a more frequent submission of applications for payment at the early stages of the project, so as to compensate the contractor for upfront costs.  Such costs can be compiled in a mobilization line item.  Notwithstanding, there should be some limits as to the amounts that will be paid for mobilization, and they should be somewhat aligned with the expenditure of the materials or labor that is being protected.

In conclusion, deposits may be a part of our present reality when dealing with construction contracts.  Although, deposits are fraught with risk, there are means to control that risk.  An association that is confronted with a demand for a sizable deposit, should contact its construction attorney for advice so that the procedures to protect the association are incorporated in the association’s contract with the contractor.  Absent taking such safeguards, an association could expose itself to significant risk, some of which may cause the association to pay twice for the same work, and other events that may cause a complete forfeiture of deposits if provided to insolvent contractors.

 

Conrad J. Lazo

Conrad J. Lazo

Board Certified Construction Law Attorney, Becker
Tampa
 | bio

 

 

 

 

Steven H. Mezer

Board Certified Condominium and Planned Development Law Attorney, Becker
Tampa
 | bio

 

 

emotional-support-animal

Emotional Support Animal

The following is a paraphrased example of the one question that we are asked most frequently:

“I live in a condominium, which has had a “no pet amendment” since it was built.  A person recently purchased a unit and has been seen with a dog that barks all the time.  The owner signed all the disclosure forms that stated “no pets,” but later gave the board a note from a nurse practitioner stating that the dog is an emotional support animal.  What can we do?”

The Federal Fair Housing Act (42 U.S.C. §§3601-3619) and the regulations promulgated thereunder require ‘housing providers,’ – including entities such as condominium or homeowners associations to make reasonable accommodations to disabled persons in rules, policies, practices or services when such accommodations may be necessary to afford a person with a disability the equal opportunities to use and enjoy a dwelling.  Florida’s version of the Fair Housing Act, Section 760.23, Florida Statutes, similarly requires accommodations for disabled persons.  Decisions of federal and state courts in interpreting the Federal Fair Housing Law and Florida’s Fair Housing laws have held that in certain instances housing providers, including a condominium or homeowners association, must accommodate those with a legitimate physical or emotional disability requiring the support or assistance of an animal.

Notwithstanding, simply providing a note from a nurse practitioner or a letter and certificate purchased from the Internet, stating that the dog is an emotional support animal does not provide the governing body of a condominium or a homeowners association the reasonable opportunity to establish that the resident suffers from a disability defined by law; and further, that the applicant requires the physical assistance or emotional support of a dog to reasonably accommodate his or her disability.  Thus, in this instance, it likely would not be unreasonable for the association to carefully request additional information to allow its governing body to evaluate the reasonableness of the request.  The courts and agencies have required that the housing provider open a “dialogue” to allow for a meaningful review of the request.

For example, the association may reasonably request that the resident provide a statement from a medical professional explaining that the requesting party: (a) has a physical or mental impairment (b) explains which major life activities are substantially impaired by the disability or handicap; (c) a description of the accommodation requested; (d) and an explanation of how the accommodation alleviates or mitigates the disability or handicap. If, upon receipt of such additional information, the association concludes that the resident is disabled under the law and that the emotional support of the identified animal is reasonably necessary to accommodate the disability, then approval of the accommodation is required by law.

Where an accommodation is required by law, the resident is still required to maintain the animal in accordance with existing rules and regulations; which among other requirements often include, that residents permit no activity that creates a nuisance or annoyance to other residents.  Such rules require to take all actions necessary to prevent the animal from making a noise that may unreasonably annoy or disturb the peace of neighboring residents.

Keep in mind that where an accommodation is required to be made by law, the animal is not considered a “pet.” Rather, it is an animal that the resident is entitled to have per the law for the physical assistance or emotional support for the disability that the resident is afflicted with. Therefore, the governing board of a community association should always seek the advice of legal counsel before denying the request of a resident for an emotional support animal.  The association’s legal counsel is best suited to advise and assist the governing board with the implementation of appropriate procedures should the board receive such a request.

 

Steven H. Mezer

Board Certified Condominium and Planned Development Law Attorney, Becker
Tampa
 | bio

 

 

 

JoAnn Nesta Burnett, Esq. JoAnn Nesta Burnett, Esq.

 

 

Telecommunication Contract Issues

Telecommunication Contract Issues

Other than possibly insurance, the largest single expense for many associations is the cost of bulk telecommunication service. Further, bulk telecommunication service agreements often have multi-year terms, some even going as long as ten years. Therefore, whether your association has a bulk telecommunications agreement or is looking at entering into a bulk telecommunications agreement, there are a number of legal and practical issues that the association should consider in moving forward with such a decision.

With regard to bulk agreements for telecommunication services, both the Florida Condominium Act and Homeowners’ Association Act provide that the costs associated with providing bulk telecommunication services are proper common expenses of the association. Further, both contemplate the authority of an association to provide a range of communication services on a bulk basis. The most common services provided on a bulk basis are television service, bulk internet service and telephone service. Additionally, associations often provide multiple services on a bulk basis from the same provider (such as receiving both cable television and internet service from the same service provider on a bulk basis.)

Further, both statutes also contemplate that the cost for services pursuant to the bulk agreement be allocated on a per unit basis rather than on a percentage basis if there is other than equal sharing of common expenses contemplated in the documents. If your association allocates expenses on something other than an equal per unit basis, you would want to review the allocation of the expenses of the bulk services agreement carefully.

While associations generally have the legal authority to enter into agreements to provide bulk telecommunication services to the owners, such agreements should be carefully negotiated by the association. Issues the association should address in the agreement include but are not limited to:

  • How the distribution system is defined and who will own the wiring once the agreement is concluded.
  • What type of work will the provider have to do within the community to provide the service, whether excavation or other construction will be necessary and what protections are in place for the association and its members?
  • If the provider is using subcontractors to install portions of the distribution system that the association and the owners are protected from any liens recorded by suppliers or subcontractors.
  • What type of insurance does the provider carry and whether that insurance protects the association?
  • What is the term of the agreement, how term is determined and is the termination date of the agreement apparent on the face of the agreement?
  • What are the service standards that the provider must meet and how is the association protected if the provider fails to meet those standards?
  • What type of easement must the association give the provider and does that easement interfere with any third parties’ existing rights?
  • Are the association’s damages against the provider limited in the event a provider breaches the agreement or fails to provide the services that are contemplated?

These are just a few of the issues that the association must address in negotiating a bulk services agreement. Any time an association is considering entering into a new bulk agreement, it should review that agreement carefully and seek appropriate guidance from its attorneys, accountants and insurance agents.

James Robert CavesJames Robert Caves, III is an attorney with the law firm of Becker & Poliakoff, P.A., which represents community associations throughout Florida, with offices in Ft. Myers, Naples and 11 other Florida cities. The firm focuses a substantial amount of its practice on condominium and homeowners association law. 

 

 

What are Pooled Reserves and How Do We Implement Them?

Cash flow funding of condominium reserves, often referred to as the “pooling” method of reserve funding, is a concept that was introduced many years ago through an amendment to the state’s administrative rules regulating condominium finances.

Under the traditional, straight-line method, required reserve contributions are calculated by using a formula that divides the cost of replacing a particular item by the number of useful years that item has left, minus the reserve funds on hand for that item, with the result being the amount to fully fund that item for the next fiscal year. Each reserve component must be separately funded and must appear as a separate line item in the reserve schedule, which is part of the budget. Absent a majority vote of the unit owners, monies for each separate reserve item can only be used for that particular reserve item.

Under the pooling or cash-flow method, each reserve item is still separately funded but the money is put into one account. The reserve schedule computation is a bit more complicated and typically needs to be prepared by an accountant or reserve consultant. The basic theory is that the association attempts to predict the year a particular asset will require deferred maintenance or replacement, and a mathematical formula is then applied to calculate required contributions for each year. In theory, the money should be available when needed, with a lower contribution than required using the straight-line method.

A pooled reserve fund can then be used for any reserve item as the need arises, creating more flexibility for the board, which most associations see as the main benefit, as opposed to having to take an annual owner vote for inter-fund spending when the straight line method is used. In other words, the board can use any money in the reserve fund for an earmarked item that is within the “pool.” Conversely, with straight-line funding, the board could not, for example, use money in the painting reserve to pay for re-roofing, unless a successful vote of the unit owners is obtained.

The main benefit of pooled reserves is greater flexibility in how the money is spent. However, the same result can be accomplished by taking a yearly vote to permit the use of reserves for a non-scheduled purpose.

There are a few negative aspects of pooled reserves, however. First, the formula is complicated and most volunteer board members, community association managers and lawyers do not possess the analytical skills necessary to compute the required charts. Second, since the funding is predicated on anticipated asset failure many years into the future, an imprecise science at best, there can be substantial underfunding if the actual cash flow deviates from the assumptions in the formula. As a result, there may be a greater likelihood of the need to adopt a special assessment.

If your association currently uses straight-line reserve accounts, you would need approval of the unit owners (i.e. a majority of the owners who vote at a meeting where a quorum is attained) to put that money into the “pool.” Once the vote to switch to pooled reserves is successful, no further votes would be required in future years and the association could continue to operate under the pooling method.

 

David MullerDavid G. Muller is an attorney with the law firm of Becker & Poliakoff, P.A., which represents community associations throughout Florida, with offices in Naples, Fort Myers and 11 other Florida cities. The firm focuses a substantial amount of its practice on condominium and homeowners association law.