Florida SB 154, Reserves, and Kaufman Language

We are a two-story condo in South Florida, traditionally the condo has waived full reserves and opted for partial reserves. This was done with a 51% quorum of ballots, and the majority of that 51% opting for partial reserves. Yes, I know the issues with condos waiving reserves, and why it's a bad thing, and why it leads to ruin, etc etc.

We are not subject to the Structural Integrity Reserve Study (SIRS) that the three story and above are, so in that respect we do not need to fully fund structural reserves.

However, I noticed in the bill, that effective June of 2023 the statutes changed to "Permit associations that are not subject to the SIRS requirement to waive reserves if approved by a majority vote of the total voting interests of the association" So that means that now you not only need a 51% quorum, you would need that total 51% to opt to waive for partial, correct?

It seems like this should be an obvious answer, but I am a little confused. Our Board is telling us differently, and the new attorney is telling us differently. It seems they think the only rule change was for three-story and up.

To make it more confusing is that last November the community had a contentious vote on reserves. They barely made the quorum, and I know for a fact that a decent number of people were pushing to get the full reserves passed. Seeing as how this law went into effect June of 2023, and I can't imagine that they received 51% of the votes to waive, and we had a different attorney, I would think we should have hit full reserves for 2024.

I've also been told that if our documents contain Kaufman language then our documents may supersede new statutes.

In the last section of our By-Laws we have this:

In the event of any conflict between the Rules and Regulations adopted, or from time to time amended, and the Condominium documents, or the Condominium Act, the latter shall prevail. If any unreconciled conflict should exist or hearafter arise with respect to the interpretation of these By-Laws and the Management Agreement, the provisions of the Management Agreement shall prevail, and as between these By-Laws and the Declaration(s) of Condominium, the provisions of said Declaration shall prevail.

From my understanding of Kaufman language this sounds like the language being used by Associations to get around new laws, like the truck law. However, in this case it is saying the latter shall prevail, so that would mean any new laws passed prevail over our By-Laws, correct?

If the law says the HOA needs 51% of the members, it doesn’t matter what the declaration and the previous vote authorizes.

Right, I misunderstood the Kaufman language intent when I posted.

My main concern is that like a lot of other condos, deferred maintenance and waiving reserves has put us in the position of a large assessment. That assessment will be due in full by the end of the year. Overlapping that timeframe will be the community vote for waiving or adopting reserves. The money will be mostly raised, and work may or may not be started by that point.

In 2023, our reserves study showed a lot of big ticket items had 1 year of useful life, these are covered under the assessment. So, when the numbers get put together for 2025's budget with and without reserves, won't the 1 year items still show as 1 year since the work has not begun or finished?

My fear is that the community will be hit with the big assessment and then get stuck fully funding 1 year remaining life items for a full year. I'd rather waive one more year, get the work done, then adopt full reserves for 2026 that now are showing 10-20 years of useful life. We had a push in 2023 to go full reserves that failed, and I think those same people will push again, I'm trying to figure out if we would be better off pumping the brakes for year.

Can the reserve study show a full life for something that has not been fixed, but has funds allocated?

The reserve study has nothing to do with the reserve account and how much is or is not reserved for the items. All it does is look at all the items in the community that have a useful life and estimate (and that's an important word) how much useful life is left.

For example, if your reserve study estimates that the the roofs on your building had one year of useful life left, you are supposed to have enough funds to cover the cost of replacement of the roofs the next year. However, if that money does not get spent because the actual life of the roofs is longer (no leaks, no cracks, no missing tiles, no problems with gutters), then your board can defer the replacement for another year. That gives you one more year to accumulate money in the reserves to pay for the replacement.

A reserve account should have a rolling balance of enough to pay for what needs to be repaired or replaced. You don't need enough in the fund to pay for everything all at once, but enough to pay for each item as it comes due for repair or replacement.

As an example, we are at the 25 year mark for our HOA. We had to replace the roofs on both of the clubhouses and we are in the middle of a three-year plan to resurface the roads. We also painted the clubhouses. Once those projects are done, we only need to be saving each year for the next roof replacement and road resurfacing 25 years from now. But we need to save enough to paint the clubhouses in 5 - 7 years. Our reserve balance may be low for a few years but will be fully funded for roofs and roads 25 years from now.

The issue with deferred maintenance is that if you also defer saving for the maintenance, you end up in the shortfall situation and are required to do a special assessment.

At this point, I don't think your community should be thinking about waiving anything - you live in a state that gets hurricanes. Hopefully Beryl didn't hit your community very hard or at all, but that might not happen next time. I suspect when it's all said and done, you'll be facing assessment increases, special assessments, and a loan or two to get everything done. And you'[ll still have to continue to fund reserves regularly. The money allocated to each element is likely to increase, especially if your board is working with a study that's older than 5 years (they should be done every five years because, inflation, changes in building codes, materials, and all that). you think.

You may want to read the most recent reserve study yourself to get a better understanding of what the numbers were supposed to do (in a perfect world, and of course we don't live there). Useful life is helpful, but it's not absolute (Mother Nature has a way of making certain repairs necessary long before your reserve study says you might need it). I'm also wondering if your questions might best be answered by the reserve specialist who conducted the study - ask the board if he or she could attend a special meeting to discuss those findings and what the numbers mean today. It might also help the board better understand what's going on - I suspect they "dragged their feet" on implementing the reserve study recommendations because it would mean assessment increases and no one likes them.

In case you haven't read a reserve study before, this can help: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.reservestudy.com/wp-content/uploads/2018/12/How-to-Read-any-RS-in-5-min-or-Less-Outline.pdf Also pay close attention to what Lori said - good luck!