Q. We are running into problems getting our condominium financed as lenders look to greater scrutiny of the association. Specifically, the question about reserves keeps coming up. The board of directors refuses to address the issue and continues to recommend the owners waive reserves. I am concerned our values will suffer as fewer buyers are ready, willing, and able to purchase in our development but have problems obtaining favorable financing. Are you seeing this around the state with other associations and what is the solution?
A. Yes. Financial institutions, banks and mortgage brokers are looking more specifically at how associations are operated. In fact, appraisers are downgrading values of units in associations without reserves. Buyers are more savvy and asking about reserves and their offers are lower on those units without reserves. As to your board, they need to be made aware of the situation and asked to take time to study the problem of no reserves. Some boards are fixed in their narrow thinking. I have seen it for years — a board that does not recognize that they have fiduciary duties to maintain values of the members’ homes. I would suggest that you urge the board to rethink their position of not supporting reserves as they have a responsibility to their members. Maybe you can request they talk to a bank lending officer or mortgage broker about the situation. As for seeing it around the state, more and more boards and condominiums are budgeting for adequate reserves because they recognize the value of reserves.
Q. I live in a homeowners association (HOA). I know the statutes are different for HOA and condominiums. Are we required to have a reserve fund? For years we put money in a fund for emergencies but our current board has not budgeted for reserves or the special emergency fund. What is your opinion of this action?
A. The HOA act does not require similar reserves as the condominium act. However, your documents may require reserves and if they do, then the board should establish a budget reserve account. It is good management for the board to examine the common facilities to determine if there will be repairs or replacements in the future. If a HOA has a clubhouse, swimming pool, roads or other amenities, the wise thing is to reserve for the future expenses. If the board establishes reserves, I suggest that the condominium model be followed.
Q. Are directors allowed to be paid for the use of their cars? Our board approves payment for gas and other expenses at each board meeting. They pay themselves for expenses that they create. I thought that board members could not be paid.
A. While directors cannot be paid a salary and must serve without compensation, they can be reimbursed for expenses. There are ways to control and account for auto mileage and purchases paid by the director. I would suggest that the director complete an expense log and it be verified by other directors. It should be noted that the director should use caution in padding the log with false or inflated claims. Such erroneous claims could be a criminal act or a violation of IRS requirements.
Q. I live in a residential manufactured home park in which we rent the land. The park is managed by the owner and a management company. One item always captured my attention is that you constantly advocate seek legal advice. My HOA does not have and never did have an attorney on retainer. Our last two contracts with the owner have been a disaster. Our contracts are negotiated every five years. I am trying to rally residents to acquire an attorney for the next contract. Can you advise us on the type of attorney to use?
New Port Richey
A. First let me address the term of a residential manufactured home park, also called mobile home parks. Most of my readers live in condominiums and homeowner associations that have ownership and title to the common areas. In general, the residential manufactured home parks do not own the common facilities or the land their homes occupy. Thus, they pay rent for the lot their home occupies and the common facilities. There can be varying degrees of ownership in some parks; the owners own their lot but not the common areas. Mobile home and residential manufactured home parks fall under FS 723. As for engaging an attorney, I guess the owner has an attorney. I would suggest that you, the association/renters engage an association attorney to help negotiate the contract and other maintenance matters. You can search in the yellow pages under association law or real estate law. You will find that many attorneys will provide you with other information such as a news letter and seminars. Have your attorney read the contract before you sign it.
Q. Our board has contracted to replace the roof but our reserve account does not cover the total expenses. They plan to call a special meeting to approve a special assessment to cover the shortfall. The board is voting on this assessment. Can this be done without a vote of the unit owners?
A. The board has the right to approve any required assessment. They are required to call a special board meeting to approve such assessments. The members can address their feeling, with limits, at the meeting but it is the responsibility of the directors to vote on such assessments.
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 CAMquestion@cfl.rr.com. To be considered, questions and comments should include the author’s name and city. Questions should be about association operations, not legal matters.