Fall is the time when Boards and their managers start scrambling
to make next year’s budget. Here’s a few tips:
Remember that in a condo, the budget must be mailed
to the owners 14 days in advance of the budget meeting. In an
HOA 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 condo statute specifically contains all of the
items to be included in the budget. The HOA statute says that
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.
In a condo, the budget must be sent out showing the
reserves as fully funded. The board can however pass a budget
that has no reserves or less than fully funded reserves if the
unit owners vote for same, at a meeting to take place before the
actual budget meeting. In an HOA the budget must include
reserves if the governing documents provide for same or the unit
owners previously voted to include reserves in the annual budget
and have not voted to waive reserves.
If your condominium or HOA has funds on hand that
are not included in reserves and total more than a few months of
assessments, these funds are considered “surplus funds” and
should be used to decrease the amount of assessments charged to
the owners in the coming year, or these surplus funds should be
returned to the owners.
Finally, at least in some parts of Florida,
foreclosures are starting to rear their ugly head again.
Associations are well advised to include a line item in their
budget for “bad debt.” This is simply a number that you
anticipate will equal the amount of assessments that unit owners
won’t pay in the coming year. To simply, if you believe 3
owners won’t pay their $5,000 in assessments this coming year,
you should include a line item of $15,000.00 in your budget,
called “bad debt.”
If I’m being honest, there is one area that
associations tend to under budget each year. You guessed it
------ attorney’s fees. Associations need to be realistic. If
the Board is going to be aggressive and seek legal help for
collections, arbitration actions, lawsuits, contract reviews and
the like, it’s probably a good idea to budget more than just a
few hours of attorney’s time each year. In any event, good luck
with your budget process and start thinking about sending out
your election materials at least 60 days in advance of the
election and annual meeting.