For many Condominium and Homeowner Associations this is a special (exhausting) time of year: budget season! A common issue that comes up when preparing the budget is whether the Association wishes to pass a budget with waived or reduced reserves. Reserves are generally those amounts for future projects that will not occur in the next year or which projects will cost in excess of $10,000.00. A review of either the Florida Condominium or HOA Act, respectfully, is required for specific reserve funding requirements for your community.
Many times an Association will wish to fund those reserve accounts at an amount less than what is required in the Association’s governing documents or applicable law. In this regard, the Association is able to adopt a budget with waived or reduced reserves, but only upon approval of a majority of the voting interests appearing at a meeting in person or by proxy. It is important to note that this does not mean a majority of the entire membership, but rather, only those which appear at a meeting in person or by proxy where a quorum is met. A review of the Association’s governing documents is required to determine the Association’s quorum requirement in order to hold a meeting. Such a meeting must be at a meeting of the membership, and not a meeting of the Board of Directors, and must be noticed in writing at least fourteen (14) days in advance.
An Association seeking to reduce or waive reserve funding should consult with a licensed community association manager and the Association’s legal counsel as to the notice requirements and the use of a special proxy in order to ensure that the vote is properly taken. Failure to properly waive or reduce the reserves results in the automatic adoption of a budget with fully funded reserves. Happy budget season!