Reserve Funds?

Our HOA board claims we cannot use funds from our reserve funds to replace a bad AC unit for our club house. I see this as an emergency because of the possible mold conditions created by not having AC. It is said that each item has to be listed as a reserve fund item. They are going to replace it anyway now in 2024 and add the funds to our HOA monthly payments in 2025. It was also stated that by Florida law there is some unknown to us some "magic calculation" as to how much by "Florida Law" we are required to put into reserves. My suggestion was to allocate the 12K required to replace the funds buy lowering reserves in 2025 from 78K to 66K as an AC unit is a once in 10 to 20 year expense. I was told this is in violation of "THE LAW". I'm new to Florida and this makes no sense to me. Could this be true? I can understand laws preventing misuse of fund such as a "entertainment" expense that they approved in the budget. But to replace a necessary unit from reserves is against the law is crazy to me.

It may be a matter of cost.

It's possible your last reserve study was performed with the assumption that only repairs exceeding a certain dollar amount (say $10K) were included. If the HVAC repair was under that, then it should be handled out of operating funds. I bet many/most boards miss this - which is one reason why so many communities are underfunded.

In this case, though, it sounds like the board is saying that the HVAC was not included at all in the last study. And the board plans to replace in 2025, with funds coming from increased assessments. That sounds reasonable to me, although mold is a concern. It's also possible that previous boards weren't totally on the ball, and the current board has to deal with the shortfall. It happens (too often, unfortunately - ask me how I know).

So it's worth asking the board about. Reserve funding can confuse a lot of people, so the more folks who understand them, the better.

What ???

Well, it says he's from CT.

The posting does not mention a "FL association" but obviously I misunderstood the post.

I will assume this is an FS 718 condominium. If this is wrong, then please say so.

What you are proposing does not violate FS 718. In fact FS 718 requires that the reserve account must be "built" so as to cover any capital expense (e.g. replacement of an A/C unit) in excess of $10,000. See FS 718.112 (2)(f) 2a. This is a long and complicated section that no unpaid volunteer should have to parse. Yet the law expects directors to have to do so. Hopefully at least the treasurer and the manager have a handle on the reserve fund requirements.

How to go forward? I advise: Consider your moves here strategically. Maybe point out the section of FS 718 I cite above. Otherwise, let the board majority do what it wants. I am not sure this battle is worth waging.

Bruce

It it not uncommon for a BOD to "borrow" money from a Reserve Fund. In many cases, a repayment plan must be established. Look for this.

That the HVAC unit isn't listed on your Reserves Study is most definitely an error. Have you read the Study? How old is it, btw?

Only items that cannot be repaired/replaced for under 1-5% or last less than a. year. of a total budget should be in the operating budget. ((I'll check our recent Study on that).

When is your HOA's 2025 budget due to owners ?

Our reserves are "pooled" to allow us to take care of these surprises. Major projects from the reserve study are earmarked but surprises like the A/C unit are covered.