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Q
& A
Question:
I
am a member an HOA in
Ocala
,
Florida
and our Board is struggling to do the right thing.
It seems opinions are plentiful but facts are hard to come
by. If you could help with a quick question it
would be appreciated.
Do
the Florida Statutes 720 for HOA or 617 for
Not-For-Profits, which I understand are the governing
statutes for our HOA, dictate that a homeowners’
association is required to maintain a specific amount of
money or a specific percentage of its budget as a reserve
fund or for any other reason?
Though
it makes perfect sense to maintain a reserve fund for
emergencies or for normal operating ease, I have not seen a
rule specifying an amount or a percentage BUT I keep hearing
rumors from a few homeowners that a reserve is required by
Florida
statues. Can you shed some light on this? M.C.,
Ocala
Answer:
It
is not required if one has not been previously established,
but if not provided, a disclosure must be given to
homeowners stating that there is no reserve and that there
is the risk of a special assessment in the future.
Specifically, the statute reads:
"If
reserves are not provided, each financial report for the
preceding fiscal year required by subsection (7) shall
contain the following statement in conspicuous type: THE
BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR RESERVE
ACCOUNTS FOR CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE
THAT MAY RESULT IN SPECIAL ASSESSMENTS. OWNERS MAY ELECT TO
PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO THE PROVISIONS OF
SECTION 720.303(6),
FLORIDA
STATUTES, UPON THE APPROVAL OF NOT LESS THAN A MAJORITY OF
THE TOTAL VOTING INTERESTS OF THE ASSOCIATION."
If
you want to establish a reserve account, a majority of the
homeowners must vote to approve the action to do so. Once
established, the fund can be used only for the repair or
improvement it is designated for. Any change in the rate of
funding or use of funding requires a vote of a majority of
the homeowners. The board only has power to make adjustments
for changes in funding due to inflation or a change to the
useful life of the asset.
EXAMPLE:
You want to establish a fund for major repairs or
replacement of a wall around the neighborhood. You expect
the wall will need to be replaced in 15 years. You know the
wall cost $100,000 five years ago so the useful life is 20
years. The $100,000 is funded at a rate of 1/20 per year if
you had started when it was built, but since you only have
15 years left to replacement it will be 1/15 a year until a
new wall is built or refurbished and then it will be 1/20
after the wall is finished. If you know the new wall will
cost $120,000 in 15 years because of inflation then the rate
is 1/15 of $120,000.
Barbara
Billiot Stage, Esq.
Question:
Our
condo rules state that "the owner, at his discretion,
can install hurricane shutters" not more than 7 days
prior nor 7 days after an official storm.
Due to our physical
handicaps we wish to install accordion or roll down
shutters. We are unable to carry, lift and hang the
requested Lexan or metal type shutters. And we can't
depend on any vendor to be on call to do that work within
the board’s time frame, especially if there are numerous
storms within the same season. Additionally, we've
promised that, if approved, we would not close our
shutters outside that time frame.
We submitted the required
form and vendor bid, along with our letter of explanation on
7/28/09. A member came and got a vendor brochure
and color sample. We've heard verbal comments,
questions, and concerns, but no written denial or approval.
I understand the board has
right to make rules, but doesn’t the board have to make
reasonable allowances for handicapped residents? We'd like
to know what action to pursue.
Thank you.
J.S.,
North Point
Answer:
Let the board know that you are requesting
"reasonable accommodations" under the Americans
with Disabilities Act of 1990. If the board members try to
argue they are private property --or a private corporation
-- tell them that they are not exempt from federal law and
you can prove it. I have case law with court rulings that I
can send you should it come to that. The only issue I see
they might have is the maintenance of the shutters. The
condo is responsible for maintaining everything on the
outside. You could sign a waiver that you would be
responsible for all maintenance and/or repairs, if that is
the issue.
Barbara
Billiot Stage, Esq.
Question:
I
read the responses regarding attendance, but none seem to
fit my situation.
I am a Director on a subdivision Board (FS 720) and three
members of the Board are trying to "blend" (merge)
the Subdivision into the Master Association without the
benefit of all homeowners in the Association voting on it.
The intent is to have three of the five Board members
approve the merger. To
placate myself and the other Board member opposed to
merger at this time, we plan on having a "Town
Hall" meeting. I would like the members of the Master
Board to attend, but again, three Board members (two of whom
are husband, who is also our Treasurer and President of
the Master, and his wife, our Secretary) do not
want the other Master Board members to attend. My contention
is, as the discussion is to involve merger, they all should
be in attendance to hear what the subdivision homeowners
have to say. Can they legitimately be kept out?
J.L., Clermont
Answer:
All meetings are required to be open to all members. Board
members are also regular members of the association. The
real question is: How
does a merger get approval? A
merger requires an amendment to the Declaration of
Restrictive Covenants and it would take a majority of the
members to approve in accordance with the procedures for
amending the declarations, as outlined in the provision
under the subheading "amendments." The board does
not have authority to take such action unless the
declarations allow for the board to approve amendments. Any
meeting to vote on amending the declarations must be noticed
by sending a meeting notice to each homeowner at least 14
days in advance. The notice must contain a conspicuous
statement\ that the purpose for the meeting is to hold a
vote to amend the declarations and a copy of the proposed
amendment should be included. It would be wise to include an
explanation of the amendment and the purpose of the
amendment as well.
Barbara
Billiot Stage, Esq.
Question:
Does
the parking spot get resigned every year?
The condominium is playing musical chairs with the parking
spots, and the board members assign themselves the best
spots.
Does the parking spot belong to the owner or the
association?
Some owners do not own cars, can they profit from the
parking spot or does the money belong to the association for
the building.
I also have other question to my understanding to finish a
building and start selling them by law they have assign
parking spot and register them, to who and can we find out
the original spots that were assigned. Below is the address
for the condominium.
Answer:
The
answer is "it depends."
The right of an association to reassign
parking spaces depends on what the declarations of
condominium, bylaws, articles of incorporation, and rules
and regulations ("the governing documents") state. A
large number of condominium documents do not address
this issue and parking assignments are at the discretion of
the board. If the board members are frequently reassigning
spaces and giving themselves the best spots a case can be
made for breach of fiduciary duty based on self-dealing. The
board is probably counting on their misguided idea that they
can never be held personally liable as some attorneys have
been known to advise board members of this, which is
incorrect, or they are counting on no one spending large
sums of money in legal fees to hold them accountable.
The ownership of the parking space also
depends on what is stated in the governing documents. Some
condominiums have attached the assigned parking space to the
deed of the condo unit. In these situations there is usually
a clause that states the parking space cannot be conveyed,
transferred, or sold except in conjunction with the condo.
While the condo owner does own that parking space, they are
not free to do whatever they want with it. If the parking
space is not connected to the deed then the condo owner has
an exclusive easement to property belonging to the
association. Again, whether the owner or the association can
profit from the sale/lease of a parking space depends on the
governing documents.
Barbara Billiot Stage, Esq.
Question:
At
the annual meeting may the board state that only members
attend the meeting?
We would like everyone to check in at the door and if a
person is not a paid member with the right to vote, we do
not want him or her at the meeting.
This is the only meeting the non-members would not be
allowed to attend. We allow non-members to attend all other
meeting the rest of the year.
This was a very sore point at our last meeting. Some
people were saying that the board has no right to tell
people (even the non-voting non-members) that they were not
allowed to attend the annual member voting meeting.
If you could answer this question before our December
meeting, we would greatly appreciate it.
Answer:
Generally,
the annual meeting is a members' meeting and the members are
ones to have a say in how it is to be conducted. The Board
of Directors will usually have a meeting afterwards to
handle usual business.
Members are defined in the Florida
Statutes as anyone who has an ownership interest in a parcel
or has an obligation to pay dues. Therefore, a member is not
limited to just one person in the household who will vote.
It includes anyone who is named on the deed and can include
a parent, sibling, child or anyone else that the homeowner
chose to include on the deed for whatever reason. Therefore,
anyone named on the deed has a right to attend all meetings,
whether they are board meetings, member meetings, annual
meetings or special meetings.
Also, a member cannot be excluded from
a meeting because he or she is past due on assessments.
A member can have voting privileges suspended if he
or she is past due 90 days or more, but the member still has
the right to attend meetings.
Additionally, a homeowner can appoint a representative to
attend the meeting for him or her if he or she is not able
to attend. This often happens with renters who have
out-of-town landlords. The owner may request that the renter
attend the meeting and let him or her know what occurred
during the meeting. The owner can even appoint the
renter to vote by proxy vote.
The other thing to consider is that the association will
appear as hiding something if it tries to exclude
attendance. Today’s homeowners are demanding more
transparency and accountability.
Now let me switch gears from my pro-homeowner stance to my
association attorney perspective.
Are you having a particular problem that may justify
excluding non-members? If
there is a problem with non-members being disruptive,
problems with the capacity of the meeting place, or people
bringing handguns to meetings (I actually have an
association with this problem), you can adopt reasonable
rules regarding meetings. I would suggest that the board
have a meeting, present a resolution and have the board vote
on the resolution. There should be a discussion of why the
board feels it necessary to adopt the resolution and all of
this must be recorded in meeting minutes.
Just
keep in mind that you cannot exclude a member because of
past due assessments. All
property owners are members, and a member can appoint a
representative to attend in his or her place.
Barbara Billiot Stage, Esq.
Question:
I live in a homeowners' Association. We have some homeowners who rent or lease their property. Now that
the property is rented and the renter has all the rights to the recreational facilities, can the homeowners who rented their place come back and use all the recreational facilities too? We are trying to change some of our rules and this question came up. So can we put this in the new rules, that the owner of a leased or rented home loses all rights to the recreational facilities?
A.B.,
New Smyrna Beach
Answer:
There
is nothing in the Florida Statutes that would prevent you
from amending your
association’s HOA documents to include such a rule,
but you would have to follow the procedures
outlined in your
documents. Usually
a certain percentage of the HOA owners must vote YES to
approve a new rule.
Barbara
Billiot Stage, Esq.
Question:
I
owned rental property in
South Florida
. Prior to renters moving in, they had to be approved by the
board. I live in
Altamonte Springs
and asked about the board screening applicants who wanted to
rent a condo in my complex and was told this is illegal. My
nephew just bought a condo in Maitland and the HOA told him
if he wanted to rent it, they would have to screen the
renters. Is my HOA just blowing smoke?
P.P.
, Altamonte Springs
Answer:
The
Florida Statutes do not prohibit condo associations from
screening applicants who want to rent a condo from a unit
owner and even provide for charging a fee for processing the
application. However, an association cannot screen
applicants unless there is a provision in the bylaws,
articles of incorporation or declaration of covenants and
restrictions allowing for screening. If these documents do
not contain this provision, then the association is breaking
the law by screening.
Barbara
Billiot Stage, Esq.
Question:
We
successfully recalled our entire board. Our newly
elected board is now ready to start healing our community.
HOA
property was turned over to us, but how do we know we have
everything?
We have been meeting resistance.
Even requests for copies of
financial reports have failed.
We don't even have access to bank accounts until the
new board members sign cards that will give us access to
previous records.
We
knew this would be hard work, but I just wish we had
guidelines to help. We don't even know if the books are
correct. Should we have all books audited?
I'll start with these questions. Thank you for
your help
L.Z.
Answer:
All HOA documents are the property of
the association and not the board. Therefore, the previous
board has a duty to turn over all documents to the new
board. You should send each member of the previous board a
letter by certified
mail with return receipt requested, giving them a
deadline to provide the documents. If they do not comply,
you will most likely have to hire an attorney, unless you
can get cooperation from the State Attorney's Office in your
area.
You
should definitely have the books audited to make sure you
limit your liability as much as possible for a previous
board's errors.
Barbara Billiot Stage, Esq.
Question:
Audit of the fiscal year 05/06 year-end financial report was done by an accounting firm CPA that has worked for the condominium for over 10 years and has always provided accurate and timely reports. The board had shown on the monthly financial reports an entry: "due to reserves from operating account" up to $165,000. The audit returned showing $115,277 due to the reserves. The board does not accept this figure, thinking it is too high. The board and management company are reviewing the figures and say they are coming up with a figure for what is really owed to the reserves. The board has made such statements as, "The CPA who did the audit did not account for reserve expenditures and the audit was a year late." The board has never voiced any concern about the CPA's competency, accuracy, or any other reason for why the board wants a different figure. My position is that I, as an owner, will not accept any changes not done by a CPA in the audit figures. I will not accept figures of an audit done by a CPA but then changed by the board and management company. (Note when I let the board know my position, I got a really hostile reply.) Is the board allowed to change these audit numbers? Do we owners have to accept these changes?
Answer:
This
is a question that should be submitted to a CPA or a tax
attorney for an expert opinion; however, I will provide some
basic information. The real question that needs to be
addressed is the reason for funds due to the reserves from
the operating account. There are two reasons I can think of
for the operating account to owe funds to the reserves. The
first would be where assessments collected were credited to
the operating account and the portion of the assessments
that are for replenishing the reserves need to be
transferred to the reserves. This is a fairly common
practice. The second reason would be that the funds in the
reserves were used for purposes that should have been
covered by the operating account, which would be a violation
of Florida Statutes §720.303(6)(h) unless approved by a
majority vote at a board meeting at which a quorum is
present.
To answer your question,
it is necessary to explain the purpose of an audit. Not all
homeowners associations are required to prepare audited
financial statements. Only those associations with annual
revenues of $400,000 or more are required to prepare audited
financial statements. The purpose of an audit is to ensure
that there is no material misstatement of the
organization’s financial position and performance and to
ensure that the organization is following the Generally
Accepted Accounting Principles (“GAAP”).
Florida
statutes provide that the amount in reserves must be
maintained in accordance with a formula that is based upon
the useful life of the asset for which the reserve was
established and the replacement cost of that asset. The
association may adjust the replacement of reserves to
account for changes in the useful life of the asset or
changes to the cost of replacing the asset. While
the board cannot change an audited financial statement, if
it does not transfer the amount indicated by the CPA to the
reserves, the figures will need to be reconciled on the next
financial statement. Whether or not the board is allowed to
transfer a different amount is the ultimate question for a
CPA or tax attorney.
Barbara Billiot Stage, Esq.
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