Q&A: How Do We Set Up a Reserve Fund?

Q I am the board president of a condo association in Miami, Florida. I think it’s a great idea and fiscally prudent, as well, to have a reserve fund to take care of any unexpected expenditures that might arise. However, the residents in our complex for many years have consistently voted down the establishment of such a reserve fund. I would like to recommend to the owners that a general pool of reserves be established. How do I do this? Do I first hold a vote on if the owners want a reserve fund, or must a study be conducted to establish an estimated cost? Any advice would be appreciated.

—No Reservations

A “Section 718.112(2)(f) of Florida Statutes provides that the annual budget of an association must include full reserves,” says Robert L. Kaye, Esq., managing member of the law firm of Kaye Bender Rembaum, based in Fort Lauderdale. “Whether or not to present the option to the membership to waive all or a portion of the full reserves is first up to the board of directors.

“If the board does not wish to reduce the reserves, there is no requirement in the law that it be offered for membership vote. Each year, the proposed budget must include the formula for computing the full reserves set forth in Section 61B-22.005 of the Florida Administrative Code, which requires an indication of the estimated replacement cost of each of the items that must be included in reserves. This suggests the need to undertake a reserve study on a periodic basis.”

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