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BUDGET
The BUDGET of a HOA is regulated by
Florida Statutes 720.303(6).
The board should prepare the budget in a timely manner before the end of
the fiscal year -- in most cases before December 31. Since owner should
be given the opportunity to vote on the budget approved by the board at
a public noticed meeting. Members have the right to speak at this
meeting for up to three minutes.
It is important to note that in HOAs members still
have the right to vote down fully funded reserves at a meeting. If
reserves are not provided in the budget, budget have to contain a
"disclaimer" is provided in the statutes.
If a
developer is
still in control of the association, the developer is not
required to include reserves in the budget. For more details please see
below!
FS 720.303(6) BUDGETS
(a) The
association shall prepare an annual budget that sets out the
annual operating expenses. The budget must reflect the
estimated revenues and expenses for that year and the
estimated surplus or deficit as of the end of the current
year. The budget must set out separately all fees or charges
paid for by the association for recreational amenities,
whether owned by the association, the developer, or another
person. The association shall provide each member with a
copy of the annual budget or a written notice that a copy of
the budget is available upon request at no charge to the
member. The copy must be provided to the member within the
time limits set forth in subsection (5)
(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.
(c)1. If
the budget of the association does not provide for
reserve accounts under paragraph (d), or the declaration
of covenants, articles, or bylaws do not obligate the
developer to create reserves, and the association is
responsible for the repair and maintenance of capital
improvements that may result in a special assessment if
reserves are not provided or not fully funded, each
financial report for the preceding fiscal year required
by subsection (7) must contain the following statement
in conspicuous type:
THE BUDGET OF THE ASSOCIATION DOES NOT
PROVIDE FOR FULLY FUNDED RESERVE ACCOUNTS FOR CAPITAL
EXPENDITURES AND DEFERRED MAINTENANCE THAT MAY RESULT IN
SPECIAL ASSESSMENTS REGARDING THOSE ITEMS. OWNERS MAY
ELECT TO PROVIDE FOR FULLY FUNDED RESERVE ACCOUNTS UNDER
SECTION 720.303(6),
FLORIDA STATUTES, UPON OBTAINING THE APPROVAL OF A
MAJORITY OF THE TOTAL VOTING INTERESTS OF THE
ASSOCIATION BY VOTE OF THE MEMBERS AT A MEETING OR BY
WRITTEN CONSENT.
2. If
the budget of the association does provide for funding
accounts for deferred expenditures, including, but not
limited to, funds for capital expenditures and deferred
maintenance, but such accounts are not created or
established under paragraph (d), each financial report
for the preceding fiscal year required under subsection
(7) must also contain the following statement in
conspicuous type:
THE BUDGET OF THE ASSOCIATION PROVIDES
FOR LIMITED VOLUNTARY DEFERRED EXPENDITURE ACCOUNTS,
INCLUDING CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE,
SUBJECT TO LIMITS ON FUNDING CONTAINED IN OUR GOVERNING
DOCUMENTS. BECAUSE THE OWNERS HAVE NOT ELECTED TO
PROVIDE FOR RESERVE ACCOUNTS UNDER SECTION 720.303(6),
FLORIDA STATUTES, THESE FUNDS ARE NOT SUBJECT TO THE
RESTRICTIONS ON USE OF SUCH FUNDS SET FORTH IN THAT
STATUTE, NOR ARE RESERVES CALCULATED IN ACCORDANCE WITH
THAT STATUTE.
(d) An
association is deemed to have provided for reserve accounts
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).
(e) The
amount to be reserved in any account established shall be
computed by means of a formula that is based upon estimated
remaining useful life and estimated replacement cost or
deferred maintenance expense of each reserve item. The
association may adjust replacement reserve assessments
annually to take into account any changes in estimates of
cost or useful life of a reserve item.
(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 parcel 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.
(g) Funding
formulas for reserves authorized by this section must be
based on a separate analysis of each of the required assets
or a pooled analysis of two or more of the required assets.
1. If
the association maintains separate reserve accounts for
each of the required assets, the amount of the
contribution to each reserve account is the sum of the
following two calculations:
a. The
total amount necessary, if any, to bring a negative
component balance to zero.
b. The
total estimated deferred maintenance expense or
estimated replacement cost of the reserve component
less the estimated balance of the reserve component
as of the beginning of the period the budget will be
in effect. The remainder, if greater than zero,
shall be divided by the estimated remaining useful
life of the component.
The formula may be adjusted each year for
changes in estimates and deferred maintenance performed
during the year and may include factors such as
inflation and earnings on invested funds.
2. If
the association maintains a pooled account of two or
more of the required reserve assets, the amount of the
contribution to the pooled reserve account as disclosed
on the proposed budget may not be less than that
required to ensure that the balance on hand at the
beginning of the period the budget will go into effect
plus the projected annual cash inflows over the
remaining estimated useful life of all of the assets
that make up the reserve pool are equal to or greater
than the projected annual cash outflows over the
remaining estimated useful lives of all the assets that
make up the reserve pool, based on the current reserve
analysis. The projected annual cash inflows may include
estimated earnings from investment of principal and
accounts receivable minus the allowance for doubtful
accounts. The reserve funding formula may not include
any type of balloon payments.
(h) Reserve
funds and any interest accruing thereon shall remain in the
reserve account or accounts and shall be used only for
authorized reserve expenditures unless their use for other
purposes is approved in advance by a majority vote at a
meeting at which a quorum is present. Prior to turnover of
control of an association by a developer to parcel owners,
the developer-controlled association shall not vote to use
reserves for purposes other than those for which they were
intended without the approval of a majority of all
nondeveloper voting interests voting in person or by limited
proxy at a duly called meeting of the association.
(i)1. While
a developer is in control of a homeowners' association,
the developer may, but is not required to, include
reserves in the budget. If the developer includes
reserves in the budget, the developer may determine the
amount of reserves included. The developer is not
obligated to pay for:
a. Contributions
to reserve accounts for capital expenditures and
deferred maintenance, as well as any other reserves
that the homeowners' association or the developer
may be required to fund pursuant to any state,
municipal, county, or other governmental statute or
ordinance;
b. Operating
expenses; or
c. Any
other assessments related to the developer's parcels
for any period of time for which the developer has
provided in the declaration that in lieu of paying
any assessments imposed on any parcel owned by the
developer, the developer need only pay the deficit,
if any, in any fiscal year of the association,
between the total amount of the assessments
receivable from other members plus any other
association income and the lesser of the budgeted or
actual expenses incurred by the association during
such fiscal year.
2. This
paragraph applies to all homeowners' associations
existing on or created after July 1, 2021.
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