TC Palm Q&A Column, December 18, 2016

By December 18, 2016Questions & Answers

Editor’s note: Attorneys at Goede, Adamczyk, DeBoest & Cross, respond to questions about Florida community association law. The firm represents community associations throughout Florida and focuses on condominium and homeowner association law, real estate law, civil litigation, estate planning and commercial transactions.

Responses by Steven R. Braten.

Q. I live in a homeowners’ association, and I have two questions concerning me: (1) what is the Board supposed to do when there is a surplus of funds at the end of the fiscal year; (2) Do I have a right to request a copy of the Association’s receivable report from the Association, as there has been a large amount written off as bad debts?

A.W., Stuart, FL

A. Thank you for your questions, and for being a dedicated reader of the Firm’s column. With regard to your first question, the Board of Directors has a few options when actual expenses are less than anticipated at the end of the fiscal year. One option is for the Board to carry over the surplus to the next fiscal year to reduce assessments, keep them flat, or to offset an increase, all of which depends on the forecast of expenses for the next fiscal year. Another option is to refund the surplus to the members. This option is usually not recommended, because the Board may be forced to levy a special assessment if projected expenses for the next fiscal year are less than actual expenses. A third option is for the Board to vote to transfer the surplus of funds to a contingency reserve or other board-made reserve account. This is to be distinguished from reserve accounts that are subject to Section 720.303, Florida Statues, which were either established by a vote of the members or initially by the Developer of your community. Such reserves are referred to as “statutory reserves” and may only be spent on the reserve item or items subject to statutory protection. With regard to your right to view the Association accounts receivable report, you have a right to inspect this report pursuant to Section 720.303(4)(j), Florida Statutes. The Association has a duty to maintain accounting records for seven years. You should verify whether the Association has adopted a process for how to request an inspection and copying of the official records of the Association and follow the adopted procedure. Otherwise, per Section 720.303(5), Florida Statues, you should make your inspection request on the Association in care of the Secretary or Registered Agent, in writing, and you should mail your request to the Association via certified mail, return receipt requested.

Q. We live in an HOA and there is a house that has been abandoned for over 10 years. The Association is mowing the grass and occasionally trimming the landscaping but there are stickers all over the house and mold on the stucco. The bank apparently does not want the house and it is not clear if the HOA fees are being paid. What can the Association do?

A. Unfortunately, the problem your community faces with an abandoned home was all to a common a challenge that community associations throughout Florida had to deal with in the most recent real estate downturn. Equally unfortunate is that the Florida Legislature only responded by amending Florida’s Condominium Act to provide a statutory solution to the abandoned home crisis. Under Section 718.111(5), if a condominium unit is the subject of a foreclosure action and the unit has been vacant for 4 continuous weeks, or where the unit is not subject to foreclosure and the unit has been vacant for 2 consecutive months and the association is unable to contact the owner or determine the owner’s whereabouts after reasonable inquiry, the Association can petition a court of competent jurisdiction to appoint a receiver to rent the unit out for the benefit of the association. So what is a homeowners association to do? First and foremost, your board of directors should consult its community association attorney for options. The association has a fiduciary duty to collect assessments and so if the owner has not paid assessments, the association can foreclose on the home. There may be unique issues with the property that make it cost prohibitive for the association to foreclosure on the house in question. If so, then petitioning a court to appoint a receiver may still be an option based on the Florida Supreme Court’s decision in Granada Lakes Villas Condominium Association v. Metro-Dade Investments case, where our state’s highest court held that trial judges have broad discretion over when to appoint a receiver and that these powers are not limited to specific statutory provisions (such as §718.111). It sounds like a compelling argument can be made for this home that a receiver should be appointed to take control of the property and rent it out for the benefit of the association. Good luck!