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ABUSE
OF RESERVE FUNDS
By
Jan Bergemann
Published
August 22, 2014
In
his blog on Monday Eric described how reserve funds should be
handled – according to the statutes. Make no mistake: The
statutes describe in no uncertain terms how to handle reserve
funds.
But
it seems that many boards consider themselves to be above the
law and use the reserve funds at their Petty Cash.
They
fund the reserves as required by the statutes, only to ignore
the provisions that require reserve funds only to be used for
anything the board (or sometimes even only the president) feels
like. I have seen many financial docs where money went in and
out of reserve funds without even a vote of the board – much
less a vote of the membership as required by the statutes.
This
is the language from FS 720.303(6)(h)
[the language in the other statutes is more or less the
same]:
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.
The
actual problem – or the reason why many board members
knowingly violate these provisions in the statutes: There is
absolutely no punishment for the violators – period! And even
if the whole money is gone, the only ones required to replace it
are the deeded owners owning property in this association.
For
condo owners it could even get worse: if a condo owner files a
complaint with the Bureau of Compliance regarding abuse of
reserve funds, the Bureau could levy a fine against the
association – payable by the association. In reality now the
owners whose moneys were abused – and disappeared – are
required to pay the fine for the board making their money
disappear.
I
have seen cases where the special assessments needed to replace
the “vanished” reserve funds were so huge that some owners
couldn’t make the necessary payments and lost their homes to
foreclosure.
That’s
how useless some of our statutes are – statutes supposedly
regulating
Florida
’s community associations.
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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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