Annual Assessments and Individual Assessments

Our community is made up of three types of homes, Grande, Estate and Bungalow. Everyone pays the same amount for the Annual Assessment (covers all common expenses) but only the Bungalow pay an additional Individual Assessment. This is because the landscaping and irrigation for the bungalows are done by the HOA. This Individual Assessment recovers the money that the HOA spends to perform these services.

As everyone knows, unless you have fixed expenses, it is very difficult to have the actual expenses match the budgeted amounts. We prefer to error on the side of collecting more than is needed. Some years we might collect a few thousand more than is needed, we might have spent less on water than expected or there were less irrigation repairs. I believe at the end of the year that any excess money collected for the Individual Assessments needs to be accounted for separately and never commingled with the common operating fund balance. I believe they should be moved to a separate reserve account to be used in the event of an unexpected large irrigation expense. Another possibility would be to give it back to the bungalows by reducing the next years Individual Assessments. Does this make sense?

Yip. A large unplanned expense will happen eventually so plan for it. Figure out what you think that might be, keep that amount in reserve, then adjust annual fees accordingly. Very reasonable while minimizing the impact of a major expense to homeowners.

You have to be careful that the excess doesn't end up being taxable. "Reserves" in Florida has a very specific meaning and unless there's a very specific reserve component with a defined useable lifetime and a reasonable "remaining useful life" then it doesn't qualify for "reserves" status. In other words, no rainy day or contingency funds for some unspecified purpose at some unknowable date in the future. While you can set up such an account, it's not a reserve fund per se, and as such MAY be subject to taxes that the bona fide reserve funds are not subject to.