WAIVING OF RESERVES
The Florida Condominium Act provides that in addition to annual operating expenses, the budget shall include reserve accounts for capital expenditures and deferred maintenance. These accounts shall 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 for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000. The amount to be reserved is computed by means of a formula which is based upon estimated remaining useful life and estimated replacement cost of each reserve item.
Waiving reserves is really like playing Russian Roulette. In fact, the law now requires that before waiving the funding of mandatory reserves, the unit owner must acknowledge that:
WAIVING OF RESERVES, IN WHOLE OR IN PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.
Associations are wise to save for that rainy day rather than be hit with that huge unplanned for assessment that can and often does result in the filing of liens and foreclosure of homes.. And remember…if the unit owners don’t vote against the funding of a reserve account, the budget must include a fully funded reserve account.