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

Right about now associations and their management companies start putting together the anticipated budget for next year.  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 in some instances, it has now gotten a lot more complicated.

BUILDINGS UNDER THREE STORIES

The bottom line is…………if your condominium building is three stories or under:

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 under subparagraph 6., whichever is greater. 

Subparagraph 6 says…….

The division shall annually adjust for inflation, based on the Consumer Price Index for All Urban Consumers released in January of each year, the minimum $25,000 threshold amount for required reserves. By February 1, 2026, and annually thereafter, the division must conspicuously post on its website the inflation-adjusted minimum threshold amount for required reserves.

WAIVING OF RESERVES IN A BUILDING LESS THAN 3 STORIES

Because the condominium is less than 3 stories, the owners have the right to waive reserves………..all of them……..no exceptions, if a majority of the owners vote in favor of waiving reserves.  As you know, I think it’s a terrible idea, especially if you live in Dade or Broward County.  Here’s why………

MANDATORY RECERTIFICATIONS IN DADE AND BROWARD

After the collapse of the Champlain Towers in Surfside, The Florida Legislature passed a law requiring mandatory structural inspections and repairs in condominium buildings three stories or taller.  However, in Dade and Broward you still must complete these inspections and repairs regardless of height, when the building reaches 25 years of age in some cases and 30 years of age in others. 

• In Dade the building goes through “building recertification” if it is 2,000 square feet – regardless of height.

• In Broward the building goes through recertification if its 3,500 square feet, regardless of height (and after 25 years – not 30).

• In addition, unlike the rest of the state, in Dade and Broward the building must pass both structural and electrical recertification.

SO IF YOU’RE NOT RESERVING FOR FUTURE REPAIRS………..

So, in a building under 3 stories, especially in Dade and Broward, if you are not reserving for future inspections and structural and electrical recertifications and repairs, when the time comes and you don’t have money, YOU WILL BE FORCED TO PASS MAJOR SPECIAL ASSESSMENTS OR BORROW A LOT OF MONEY FROM THE BANK.  IT’S YOUR CALL…… RESERVE FOR THESE ITEMS NOW OR FACE ASSESSMENTS AND LOANS LATER ON.

Next week, we’ll talk about budgets for condominium buildings 3 stories or taller.

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