DOING THE BUDGET IN LARGE CONDOS IS NOT AS EASY AS IT USED TO BE

Last week we told you about how difficult it has become to do the budget in smaller condominiums.  Well…….if you think it’s easier in larger sized condominiums, you’re wrong.   It’s worse.  Like smaller condos, it used to be real simple………throw in the anticipated income……..show the anticipated expenses………..budget for roof, pavement and painting reserves, perhaps waive the reserves………and you’re done.  Well……… because of mandatory reserves, it has now gotten a lot more complicated.

WHAT IS A LARGER SIZE CONDOMINIUM AND WHY DOES IT MATTER?

In simple terms, a condominium that has three or more habitable stories.  If your condominium meets this definition you are required to complete a structural inspection reserve study (SIRS) by December 31^st, 2025.  In addition, starting with the budget for 2026, you are required to fully fund the amounts due according to the structural integrity reserve study (SIRS).  Here are the components of a structural integrity reserve study:

a. Roof.

b. Structure, including load-bearing walls and other primary structural members and primary structural systems as those terms are defined in s. 627.706.

c. Fireproofing and fire protection systems.

d. Plumbing.

e. Electrical systems.

f. Waterproofing and exterior painting.

g. Windows and exterior doors.

h. Any other item that has a deferred maintenance expense or replacement cost that exceeds $25,000 or the inflation-adjusted amount determined by the division whichever is greater, and the failure to replace or maintain such item negatively affects the items listed in a.-g., as determined by the visual inspection portion of the structural integrity reserve study.

NON – WAIVER…except in one limited circumstance

Whereas it was previously possible to waive the funding of reserves for all of these components, those days are gone.  They all must be funded, unless:

the association has completed a milestone inspection within the previous 2 calendar years, and upon the approval of a majority of the total voting interests of the  association, the association may temporarily pause, for a period of no more than two consecutive annual budgets, reserve fund contributions or reduce the amount of reserve funding for the purpose of funding repairs recommended by the milestone inspection.

WHAT ABOUT NON SIRS RESERVES?

The statute still says that:

In addition to annual operating expenses, the budget must include reserve accounts for capital expenditures and deferred maintenance. These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $25,000 or the inflation-adjusted amount determined by the division whichever is greater.

So……….you must still reserve for non SIRS expensive anticipated repairs or replacements for things like the elevator and pool if those repairs or replacement costs are expected to be at least $25,000.00.  However, the majority of unit owners may vote to waive the funding of these items.

THE TIMING OF THE BUDGET

The board of administration shall adopt the annual budget at least 14 days before the start of the association's fiscal year.

Did you think the above is confusing?  Well wait until next week.

Watch our recent episode of Condo Craze and HOAs: