Preparing for a Complicated Budget Season

By Jonathan S. Goldstein / Published August 2024

The upcoming budget season will not be a typical one for condominiums with buildings that are three stories or more because associations must obtain their structural integrity reserve study (SIRS) if they have not already done so and then grapple with the question of how to implement the requirement to fully fund the structural integrity reserves. In particular, associations must work with legal counsel to determine requirements for a budget voted on and “adopted” before December 31, 2024. On the one hand, it is arguable that Section 718.112(2)(f)(2)(a) requires structural integrity reserves to be maintained in the upcoming budget, regardless of when it is adopted; however, it is also arguable that unless a budget is adopted “on or after December 31, 2024,” the members can still waive or reduce structural integrity reserves through an appropriate vote of the membership. Whether the Division of Florida Condominiums, Timeshares, and Mobile Homes would agree with the latter interpretation is still undetermined, and this is just one of various issues that would benefit from Division rulemaking.

     A similar issue that would benefit from Division rulemaking and that boards should consult with legal counsel about is whether structural integrity reserves can be funded using the more flexible cash flow (pooled) method versus the straight-line method, in which every reserve component must be funded individually and should be presented as a distinct line entry in the reserve schedule included within the budget. Straight-line funding eliminates the flexibility to use those allocated funds for another reserve component.  Associations should also consider whether to seek member approval (a majority of the membership voting interests) to transfer pre-existing reserve beginning balances from one reserve account to another reserve account as part of the adoption of a post-SIRS budget. This may be an integral part of reserve planning if reserve schedules are incorporating the use of pre-existing balances for pooled reserve components to which such balances were not previously allocated. Similarly, given that nonstructural reserves can still be waived or used for alternative purposes with a membership vote, thought can be given as to whether to seek a vote to apply non-SIRS pre-existing balances to the SIRS account or to seek their waiver. Similarly, many associations voluntarily reserve for certain nonstructural reserve components in the aggregate and may wish to revisit such practice with their reserve specialist, legal counsel, and management team. Since 2023 the membership vote required to use reserves for an alternative purpose (including to use them for other items in the pool) is a majority vote of the total eligible voting interests of the association.

THE INFORMATION CONTAINED IN THIS ARTICLE HAS BEEN PREPARED FOR INFORMATIONAL PURPOSES AND DOES NOT CONSTITUTE PROFESSIONAL ADVICE. YOU SHOULD NOT ACT UPON THE INFORMATION CONTAINED IN THIS ARTICLE WITHOUT OBTAINING SPECIFIC PROFESSIONAL ADVICE. 

Jonathan S. Goldstein

Equity Partner and Co-chair of the Condominium and HOA Practice Group

     Jonathan S. Goldstein is a Martindale Hubbell “AV” rated partner at Haber Law. His practice areas include condominium and homeowners’ association (HOA) law, commercial litigation, and construction litigation. He is board-certified in condominium and planned development law. Mr. Goldstein has represented community associations in all facets of general representation and collections, including but not limited to turnover and construction-related disputes, covenant enforcement, amendment drafting, meeting attendance, arbitration before the the Division of Florida Condominiums, Timeshares, and Mobile Homes, lien foreclosures, and corporate governance. For more information about Haber Law, call 305-379-2400 or visit www.haber.law.