Richard White: Community looks into possibility of self-insurance

Q. We have a community of more than 1,000 homes; many of them are older than 20 years. We are limited in obtaining insurance. Does Florida allow the association to form an insurance pool and become self-insured? Our experience ratio is excellent, and I believe we have the money to do this. Can you give me any idea of where to start? T.M. — Palm Beach

A. I would start by asking your attorney, your insurance agent and your CPA. There are too many variables and problems for me to provide an answer. Maybe rather than full self-insurance, you can establish coverage that has a large deductible, both on the first dollars and on the top dollars. Just be careful of a situation called co-insurance. In other words, share the risk with a company. Above all, make sure that your owners are aware of the discussion and plans.

Q. We are a small homeowners association with many younger children. I have seen in the paper recently some communities have put restrictions on certain breeds of dogs (i.e. American pit bulls). Do you have any legal advice or recommendations? M.S. — Miami

A. It may be possible, but you must understand that you will be altering the documents and the deed restrictions. Therefore, I highly recommend that you have your attorney guide you through the process. You must make sure that your owners are aware of the pending changes and that they are a part of the approval process. A common mistake that people have when rule changes are discussed is that they perceive a problem when there is no problem. The question is, do you have a problem with pit bull dogs attacking children or do you think that you could have a problem? Do not change or make new rules just because you think you could have a problem. Another side of the question is what responsibilities does the association have to prevent such attacks? Be careful in assuming too many duties of the association. Unless your documents state your duty to protect the children from dog attacks, you may not have the obligation to have new rules limiting dogs. Maybe it would be best to engage the county or city in changing the ordinances. This is a way to change rules without the expense of altering your documents and deed restrictions.

Q. I live in a small condominium association that owns its own laundry equipment. Six years ago, we purchased new washers and dryers and set up a reserve account to replace the washers and dryers. The receipts have been used to fund the reserve account to replace the equipment when needed. Recently, the condominium found that it had a termite problem. The board of directors used the money in the laundry reserve to pay for the eradication of the termites. This was done without consulting the unit owners. Should the board have first obtained permission from the unit owners before taking this action? J.C. — Clearwater

A. Boards do not have the right to use reserve funds without the members’ approval except to pay for the reserve account item. In this case, the board could have approved to buy new laundry machines without the members approval. Since they used the reserve funds for another item, termite eradication, they either need to approve a special assessment to repay the expense or call a special members meeting and have the members vote on using the reserve funds to pay for the termites. The board cannot use reserve funds to pay for other expenses. They have other options such as a special assessment.

Q. We are a small condominium association. Some of our board members want to raise our maintenance fees to direct more money into the reserves. They claim our property resale value will increase by having huge amounts of money in the reserves. We have managed our money quite well in the five years we have been in control of our condominium association. We have replaced the roof and repainted our buildings, all with money put into the reserves. This year we will repave the driveway and repair the pool with reserve funds. After these major projects are completed, our reserves will grow again quickly and some of us feel it will simply become a savings account for owners down the road. Will a huge reserve fund significantly raise the resale value of our homes? A.D. — Lakeland

A. Reserves can affect your property values; however, it is not necessary to collect more than necessary. The statutes are extremely clear in how to establish proper reserves. They must be calculated each year and for specific items. They are estimated for future expenses beyond a year. No person can accurately predict future expenses but they can predict what they may be and by recalculation and each year, you can adjust collections. The state has an excellent book on reserves. Contact the Division and ask for “Budgets and Reserves Made Easy.” Last year the book cost $5. Send a check with your name and address to The Division of Florida Land Sales Condominiums and Mobile Homes, Attn: Printed Materials, 1940 N. Monroe St., Tallahassee, FL 32399.

Q. Is there a maximum percentage increase allowed for condominium fees by Florida law, or is it strictly up to each association to decide what they want to increase? I had heard Florida only allows a certain percentage increase per year. I looked in the statute and could not seem to find anything. J.M. — West Palm Beach

A. Each association is required to produce a budget each year to meet projected expenses and a reserve budget. There is no limit on how much these budgets can increase. If the expense budget increases more than 115 percent, the members can petition the board to call a members meeting to approve an alternate expense budget. If the alternate budget is not approved, the board’s budget stands. Keep in mind that the majority of the income to maintain the common areas and operate the association comes from these fees. If the owners vote to select an alternate budget, the board may not be able to maintain the common areas.

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Richard White is a licensed community association manager in Florida. Questions should be mailed to him at 6039 Cypress Gardens Blvd. # 201, Winter Haven, Fl. 33884-4415; e-mail To be considered, questions and comments should include the author’s name and city. Questions should be about association operations, not legal matters.

© 2006 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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