Limitations on Assessment Increases

LIMITATIONS ON ASSESSMENT INCREASES

    During the budget season, we are often asked if limitations exist for increasing assessments for the upcoming year. This edition of The Association e-Lawyer will address this question.

CONDOMINIUMS:

I. Statutory Limitations:

    Section 718.112(2)(e) contains the following, greatly misunderstood, budgetary limitations:

A. During Developer Control:

    If the developer controls the board, assessments may never exceed 115 percent of assessments for the prior fiscal year unless approved by a majority of all voting interests.

B. After Developer Control Ends:

    Notwithstanding what many people think, post developer condominium boards are not prohibited from increasing assessments which exceed 115 percent of assessments for the prior fiscal year. If, however, the assessments exceed this amount, the following process is put into motion:

    1. It must first be determined if the proposed assessments exceed 115 percent of assessments for the preceding fiscal year. If the answer to that question is no, then the budget adopted shall take effect as scheduled. If, however, the answer to that question is yes, we must proceed to step 2.

    2. If the proposed assessments exceed 115 percent of assessments for the preceding fiscal year it must then be determined how much of that increase is related to:

        a. Reserves;

        b. Anticipated expenses which the Board does not expect to be incurred on a regular or annual basis; and

        c. Assessments for betterments to the condominium property.

    If, after removing the above amounts from the assessments, the increase is reduced to less than 115 percent, the budget adopted by the board shall take effect as scheduled. If however, the increase is still 115 percent or more, we must proceed to step 3.

    3. If, after removing the items addressed above, the proposed assessments still exceed 115 percent of assessments for the preceding fiscal year then, within 21 days after the adoption of the budget, the members may make a written request that a special members’ meeting be held to consider a substitute budget. The request is considered complete if at least 10 percent of all voting interests make such a request. If the request is not properly and timely made, the budget adopted by the board shall take effect as scheduled. If, however, the request is properly and timely made, we must proceed to step 4.

    4. If the request for a special members’ meeting is properly and timely made, then a special members’ meeting must be conducted within 60 days after the adoption of the budget. At that time, the members may consider and adopt a substitute budget. However, the budget adopted by the board shall still take effect as scheduled if:

        a. A quorum of the members is not obtained for that meeting, or

        b. If less than a majority of all voting interests fail to approve a substitute budget.

II. Limitations Found in the Governing Documents:

    While not typical, occasionally individual condominium governing documents will contain limitations on the increase of assessments and budgets. If they are more stringent than the statutory limitations outlined above, they must be followed. The following is an example of one such limitation:

The following must be agreed to by Owners who represent at least sixty-seven percent (67%) of the total allocated votes in the Association:

* increases in assessments that raise the previously assessed amount by more than 15%.

HOAs

I. Statutory Limitations:

    As of the date of this publication, there are no statutory limitations on assessment or budget increases for HOAs.

II. Limitations Found in the Governing Documents:

    Unlike condominiums, which seldom contain assessment or budgetary limitations in their governing documents, HOAs many times do contain such limitations. A typical limitation found in HOA documents allows for a small percentage increase (3%-7%) and then provides for special quorum and other meeting requirements to permit members to vote for or against larger increases.

    Hopefully, with community associations expieriencing major increases in their insurance premiums the above information will be helpful when budgeting for these anticipated expenses.

FIRM NEWS: The law firm of Taylor & Carls, P.A. is pleased to announce that Jennifer Sinclair has been admitted into the Florida Bar and is the attorney in residence in the firm’s Tampa office.

The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne, Tampa and Palm Coast, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition was prepared by Robert L. Taylor, Esq. of Taylor & Carls, P.A. The information contained in The Association e-Lawyer should not be acted upon without professional legal advice. The opinions expressed herein are as of the date hereof, and this law firm undertakes no obligation to advise the Association of subsequent changes in the law.

©2006 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached Toll Free at 1-800-395-6235 or locally at 407-660-1040.
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