A Florida Condo Q & A
The following are questions fielded by Richard White, Miami Herald business columnist and condo expert. In this era of high Florida mortgage payments, insurance, taxes and condo fees, it’s imperative to know where your money is going. Owning a condo can be a confusing proposition, but this helpful Q & A session should educate you as to how to take on that endeavor:
QUESTION #1: Our condo association never asks members what they want. It has meetings and just makes decisions.
Should the members be allowed to talk on subjects and vote? They approve the budget and special assessments without concern for what the members can pay. They also approve repairs that I feel are not needed and then we have to pay for their decisions.
Do we, as members, have a right to vote on spending our funds?
ANSWER #1: Someone recently sent an article from Business Week titled “Whose Company Is It Anyway” by Jack and Suzy Welch. It starts by saying that the company is in business for the shareholders.
The same is true for the owners, the members, of a condominium or homeowners association.
Florida associations are established as a republic type of government, not a democratic form, however. What this means is that members elect however many directors to serve as their representatives and make decisions in favor of the members. Your documents and the statutes place responsibility for the operations of the association on these elected directors.
These directors must uniformly enforce rules and regulations and restore and maintain the common areas. In accomplishing these responsibilities, they must act in the interest of the members and not hold up necessary repairs.
Personal agendas are usually not in the interest of members. Therefore, a board must conduct itself to function as an elected official and vote as their members desire. The key is that if a repair is necessary, then the cost of those repairs must be approved by the directors and assessed to the members to pay.
QUESTION #2: In November our insurance switched to Citizens, which requires annual premium payments. Our homeowner’s insurance premium increased by 100 percent.
We made a special assessment to make up the difference. Further, our agent has told us that the November 2007 premium could jump another 25 percent.
In putting together our new budget for the year beginning in February, some directors think we have to fully fund the entire premium plus the estimated 25 percent increase. Other directors think we can minimally fund the premium and special again in November 2007 if needed.
The theory here is we do not know what the premium will be in 2007. Our association has always used a partially funded budget since it was formed 26 years ago. Do we legally have to fund an estimated premium or can we partially fund as we have always done?
ANSWER #2: A budget is an estimate of expected expenses. Since your Florida insurance agent has provided information of the expected increase, use that figure. Unless you have a very special membership, it is much easier for them to pay a small amount each month rather than a large single amount in the future. Putting it in the budget will, in fact, save you money.
To pass a special assessment and collect the funds, you will need special notices for the meeting and extra accounting and collections for the special assessment. If you do not have the expected increase, you will have a surplus and the following year’s budget can be reduced or the surplus can be rolled into the reserves, pay for other expenses, or be refunded.
