EmilyB2 (Arizona)
Posts: 40
Posts: 40
Posted:
We have had a reserves bank account for a few years, not sure when it started but according to the annual budgets, the balance sheets and the size of the bank account it looks like since 2005. In the annual budgets, starting 2005 (it may have started in 2004, I haven't seen that budget) a line item of "deferred maintenance" was added. Those funds were put into the reserves bank account. Each year the amount budgeted increased and was placed in the reserves bank account. A few months ago, our PM said we should move some of the reserves funds into the operating account. We have since got a new PM, but from the same company, because another HOA complained about him/her and that person fired.
We are currently working on our new budget for next year. I started going through the DCCR, and the Florida Statues and noticed that we had that "deferred maintenance" line item section in the budgets, but not last year, and our documents say we need a Capital Budget to determine what goes into the reserves account. We have only had that line item but not an actual Capital Budget, or perhaps I just don't have that document and the new PM can't find one either.
My concerns:
1) We don't know how much we need to repair our assets because we don't have a Capital Budget.
2) The line item of "deferred maintenance" was removed last year and therefore funds for repairs are not being accrued and saved.
3) Several thousand dollars of funds money for repairs was removed from the reserves account and we are not sure why.
4) We really need repairs.
5) If the funds from the reserves are used for another purpose than for asset repairs/replacement than I am concerned when repairs and replacements are needed we won't have the funds available and our community will deteriorate and home values will come down. No one will want to live here.
I have brought this up to the PM and she says that since the developer didn't set up a reserve account (which she interprets as a Capital Budget, not an actual bank account) that we can not have a reserves account. I showed her the budget from 2005 showing the line item, and reminded her that the association was turned over in 2006. She can not confirm when our reserve bank account was opened.
Her and another board member seem to think having a Capital budget is optional and not needed because we are not a condo, and that at the moment we can use the reserve bank account for whatever we want, even operations if we need it for that purpose.
FYI, we are a 500 home community, not a condo or townhomes. Our assets are currently deteriorating and need repairs.
My questions:
1) Just because we didn't know previously what this account and the line item was for, does this then make it seem like it never existed and we don't have to follow the law.
2) Can the board member and the PM decide that we can use these funds for anything just because we got rid of the line item last year?
3) Does the line item and having the reserves bank account before the developer turned it over, qualify the HOA as having a reserves account as stated in the law, even though we didn't have a properly done Capital budget?
4) What suggestions are there for moving forward?
Here is what the law says:
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/0720.html/
720.303
6. Budgets
(b) In addition to annual operating expenses, the budget may include reserve accounts for capital expenditures and deferred maintenance for which the association is responsible. If reserve accounts are not established pursuant to paragraph (d), funding of such reserves is limited to the extent that the governing documents limit increases in assessments, including reserves. If the budget of the association includes reserve accounts established pursuant to paragraph (d), such reserves shall be determined, maintained, and waived in the manner provided in this subsection. Once an association provides for reserve accounts pursuant to paragraph (d), the association shall thereafter determine, maintain, and waive reserves in compliance with this subsection. This section does not preclude the termination of a reserve account established pursuant to this paragraph upon approval of a majority of the total voting interests of the association. Upon such approval, the terminating reserve account shall be removed from the budget.
...
(d) An association is deemed to have provided for reserve accounts if reserve accounts have been initially established by the developer or if the membership of the association affirmatively elects to provide for reserves. If reserve accounts are not initially provided by the developer, the membership of the association may elect to do so upon the affirmative approval of a majority of the total voting interests of the association. Such approval may be obtained by vote of the members at a duly called meeting of the membership or by the written consent of a majority of the total voting interests of the association. The approval action of the membership must state that reserve accounts shall be provided for in the budget and must designate the components for which the reserve accounts are to be established. Upon approval by the membership, the board of directors shall include the required reserve accounts in the budget in the next fiscal year following the approval and each year thereafter. Once established as provided in this subsection, the reserve accounts must be funded or maintained or have their funding waived in the manner provided in paragraph (f).
...
(f) After one or more reserve accounts are established, the membership of the association, upon a majority vote at a meeting at which a quorum is present, may provide for no reserves or less reserves than required by this section. If a meeting of the unit owners has been called to determine whether to waive or reduce the funding of reserves and such result is not achieved or a quorum is not present, the reserves as included in the budget go into effect. After the turnover, the developer may vote its voting interest to waive or reduce the funding of reserves. Any vote taken pursuant to this subsection to waive or reduce reserves is applicable only to one budget year.
Thank you for your help.
We are currently working on our new budget for next year. I started going through the DCCR, and the Florida Statues and noticed that we had that "deferred maintenance" line item section in the budgets, but not last year, and our documents say we need a Capital Budget to determine what goes into the reserves account. We have only had that line item but not an actual Capital Budget, or perhaps I just don't have that document and the new PM can't find one either.
My concerns:
1) We don't know how much we need to repair our assets because we don't have a Capital Budget.
2) The line item of "deferred maintenance" was removed last year and therefore funds for repairs are not being accrued and saved.
3) Several thousand dollars of funds money for repairs was removed from the reserves account and we are not sure why.
4) We really need repairs.
5) If the funds from the reserves are used for another purpose than for asset repairs/replacement than I am concerned when repairs and replacements are needed we won't have the funds available and our community will deteriorate and home values will come down. No one will want to live here.
I have brought this up to the PM and she says that since the developer didn't set up a reserve account (which she interprets as a Capital Budget, not an actual bank account) that we can not have a reserves account. I showed her the budget from 2005 showing the line item, and reminded her that the association was turned over in 2006. She can not confirm when our reserve bank account was opened.
Her and another board member seem to think having a Capital budget is optional and not needed because we are not a condo, and that at the moment we can use the reserve bank account for whatever we want, even operations if we need it for that purpose.
FYI, we are a 500 home community, not a condo or townhomes. Our assets are currently deteriorating and need repairs.
My questions:
1) Just because we didn't know previously what this account and the line item was for, does this then make it seem like it never existed and we don't have to follow the law.
2) Can the board member and the PM decide that we can use these funds for anything just because we got rid of the line item last year?
3) Does the line item and having the reserves bank account before the developer turned it over, qualify the HOA as having a reserves account as stated in the law, even though we didn't have a properly done Capital budget?
4) What suggestions are there for moving forward?
Here is what the law says:
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0720/0720.html/
720.303
6. Budgets
(b) In addition to annual operating expenses, the budget may include reserve accounts for capital expenditures and deferred maintenance for which the association is responsible. If reserve accounts are not established pursuant to paragraph (d), funding of such reserves is limited to the extent that the governing documents limit increases in assessments, including reserves. If the budget of the association includes reserve accounts established pursuant to paragraph (d), such reserves shall be determined, maintained, and waived in the manner provided in this subsection. Once an association provides for reserve accounts pursuant to paragraph (d), the association shall thereafter determine, maintain, and waive reserves in compliance with this subsection. This section does not preclude the termination of a reserve account established pursuant to this paragraph upon approval of a majority of the total voting interests of the association. Upon such approval, the terminating reserve account shall be removed from the budget.
...
(d) An association is deemed to have provided for reserve accounts if reserve accounts have been initially established by the developer or if the membership of the association affirmatively elects to provide for reserves. If reserve accounts are not initially provided by the developer, the membership of the association may elect to do so upon the affirmative approval of a majority of the total voting interests of the association. Such approval may be obtained by vote of the members at a duly called meeting of the membership or by the written consent of a majority of the total voting interests of the association. The approval action of the membership must state that reserve accounts shall be provided for in the budget and must designate the components for which the reserve accounts are to be established. Upon approval by the membership, the board of directors shall include the required reserve accounts in the budget in the next fiscal year following the approval and each year thereafter. Once established as provided in this subsection, the reserve accounts must be funded or maintained or have their funding waived in the manner provided in paragraph (f).
...
(f) After one or more reserve accounts are established, the membership of the association, upon a majority vote at a meeting at which a quorum is present, may provide for no reserves or less reserves than required by this section. If a meeting of the unit owners has been called to determine whether to waive or reduce the funding of reserves and such result is not achieved or a quorum is not present, the reserves as included in the budget go into effect. After the turnover, the developer may vote its voting interest to waive or reduce the funding of reserves. Any vote taken pursuant to this subsection to waive or reduce reserves is applicable only to one budget year.
Thank you for your help.