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RESERVES
– OFTEN CONSIDERED A SLUSH FUND BY BOARD MEMBERS!
By
Jan Bergemann
Published
October 17, 2014
The
Florida
statutes regulating community associations are very specific
about setting up reserve accounts -- and how to use the money in
these reserve accounts. The statutes make it abundantly clear
that the money in the reserve funds can only be used for the
purpose intended – or the approval of the majority of the
voting membership is required to put the money to a different
use.
But
that still doesn’t stop many boards from using existing
reserve funds for all kinds of purposes – but definitely not
for the purpose intended.
Remember:
The provisions in the statutes carry a big warning to owners for
not funding – or underfunding -- the reserve accounts. But
what happens if the reserve accounts were fully funded, but the
board just used the funds under dubious pretenses – and there
is no money when a new roof (for
example) is needed?
Who pays for the cost of the new roof? The owners, who already
paid for it by funding the roof reserves – or the board
members who wasted these reserve funds for their private agenda?
You guessed right: The owners will have to pay the special
assessment due to pay for the cost of the new roof – and some
owners might lose their homes over it since they may not be able
to come up with the money for the special assessment.
Shouldn’t
there be a provision in the statutes with a warning like:
“Owners will still be liable to pay a special assessment if
the board squandered the money!”
But
since the DBPR Division of Florida Condominiums,
Timeshares, and Mobile Homes has recently levied fines against
boards of associations that used reserve money for other
purposes than intended, boards are getting more and more inventive.
From the excuse: The reserve funds were not properly
set up – meaning in reality they are not really reserve
accounts – to adding a line item in the budget under Funding
reserves named Slush Fund – I have seen it all in recent
months.
There even have been board presidents considering
themselves the CEO of the corporation using reserve funds as a general rainy day account (See: NO
BOARD MEETINGS IN 14 YEARS!).
In
my opinion the board members squandering reserve funds should as
well be personally liable for replacing the funds. I am sure
that would put the abuse of reserve funds to a screeching halt!
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Jan Bergemann is president of Cyber Citizens For Justice,
Florida
's largest state-wide property owners' advocacy group.
CCFJ works on legislation to help owners living in
community
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associations. He moved to
Florida
in 1995 - hoping to retire. He moved into a HOA, where the
developer cheated the homeowners and used the association dues
for his own purposes. End of retirement!
CCFJ was born in the year 2000, when some owners met in
Tallahassee
- finding out that power is only in numbers. Bergemann was a
member of Governor Jeb Bush's HOA Task force in 2003/2004.
The organization has two websites to inform interested
Florida
homeowners and condo owners:
News Website: http://www.ccfj.net/.
Educational Website: http://www.ccfjfoundation.net/.
We think that only owners can really represent owners, since all
service providers surely have a different interest! We are
trying to create owner-friendly laws, but the best laws are
useless without enforcement. And enforcement is totally lacking
in
Florida
!
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