Florida Reserve Studies

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Florida Reserve Study Laws

This is a summary of the new provisions corresponding to the reserve studies, I suggest that you consult the complete Bill for other important requirements.

CS/CS/SB 1702: Building Safety

GENERAL BILL by Rules ; Regulated Industries ; Bradley ; (CO-INTRODUCERS) Rodriguez ; Garcia ; Cruz

Building Safety; Defining the term “milestone inspection”; specifying that the purpose of a milestone inspection is not to determine compliance with the Florida Building Code or the firesafety code; requiring certain associations to periodically have a study conducted relating to required reserves after a specified date; requiring associations to provide for the maintenance, repair, and replacement of condominium property; authorizing boards to adopt a special assessment or borrow money for certain reasons without unit owner approval; revising certification and education requirements for directors of association boards, etc.

Florida has adopted two separate statutes, Chapter 718 for Condominium Associations, and Chapter 720 for Homeowners Associations.

The reserve study required under s. 718.112(2).

(13) FINANCIAL REPORTING.

The rules must include, but not be limited to, standards for presenting a summary of association reserves, including a good faith estimate disclosing the annual amount of reserve funds that would be necessary for  the association to fully fund reserves for each reserve item  based on the straight-line accounting method or to fully fund  reserves based on the pooling method. This disclosure is not applicable to reserves funded via the pooling method. In  adopting such rules, the division shall consider the number of  members and annual revenues of an association.

(f) Annual budget.

718.113(1), the budget or a schedule attached to it must show  the amount budgeted for this maintenance. If, after turnover of  control of the association to the unit owners, any of the  expenses listed in s. 718.504(21) are not applicable, they need  not be listed. 2.a. 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, the maintenance and replacement of the condominium  property identified in s. 718.301(4)(p)  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 $10,000. The amount to be reserved  must be computed using a formula based upon estimated remaining  useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may  adjust replacement reserve assessments annually to take into  account any changes in estimates or extension of the useful life  of a reserve item caused by deferred maintenance.

If an association is required  to perform a reserve study under subparagraph 3., the developer  may vote to waive reserve contributions or reduce reserve  funding only if the association’s reserve obligations are funded  consistent with the reserve study currently in effect or if the  association provides an alternative funding method for the  association’s reserve obligations. If a meeting of the unit owners has been called to determine whether to waive or reduce  the funding of reserves and no such result is achieved or a quorum is not attained, the reserves included in the budget  shall go into effect. After the turnover, the developer may vote its voting interest to waive or reduce the funding of reserves.

3. Effective January 1, 2024, unless the declaration of condominium, articles of incorporation, or bylaws provide for a  more frequent reserve study, an association with a residential  condominium building that is three stories or more in height and  subject to the milestone inspection requirements in s. 553.899  must have a study conducted of the reserves required to  maintain, repair, replace, and restore the condominium property  identified in s. 718.301(4)(p) at least every 3 years. The board  shall review the results of such study at least annually to  determine if reserves are sufficient to meet the association’s  reserve obligations and to make any adjustments the board deems  necessary to maintain reserves, as appropriate. The division  shall adopt rules setting forth uniform financial standards and  forms for reserve studies. The reserve study must include, without limitation:

a. A summary of any inspection of the major components of  the condominium property identified in s. 718.301(4)(p) and any  other portion of the condominium property that the association  is obligated to maintain, repair, replace, or restore;

b. If applicable, a summary of the findings and  recommendations of the milestone inspection report required  under s. 553.899 and any other structural or life safety  inspection of the condominium property considered in the reserve study.

c. An identification of the structural components of the  building for which necessary reserves may be reasonably  projected and an identification of the structural components of  the building with an indefinite useful life for which a  reasonable determination of necessary reserves may not be estimated.

d. An estimate of the useful life of the structural  components of the building identified in s. 718.301(4)(p) for which an estimate of useful life may be determined as attested  to by a licensed architect or engineer in the turnover  inspection required under s. 718.301(4)(p), a milestone  inspection, or any other structural or life safety inspection of  the condominium property;

e. An estimate of the remaining useful life of any other portion of the condominium property that the association is  obligated to maintain, repair, replace, or restore;  

f. An estimate of the cost of maintenance, repair, replacement, or restoration of each major component of the  condominium property identified in s. 718.301(4)(p) and any other portion of the condominium property identified pursuant to  sub-subparagraph c.;

 g. An estimate of the total annual assessment that may be necessary to cover the cost of maintaining, repairing, replacing, or restoring the major components of the condominium  property identified in s. 718.301(4)(p) and any other portion of  the condominium property identified pursuant to sub-subparagraph c., and an estimate of the funding plan, including any  alternative funding method, which may be necessary to provide adequate funding for the required reserves; and  

h. A schedule for the full funding of reserves. A reserve  account is fully funded when the actual or projected reserve balance in the reserve account is equal in direct proportion to  the fraction of useful life for a given component or components multiplied by the current replacement costs for the component or  components.

4. The annual budget must, at minimum:

a. Identify all items for which reserves are or will be established.

b. Provide an estimate of the maintenance, repair, and replacement costs for the structural components for which an  estimate of useful life may be determined;

c. Identify any structural component for which a reserve account is not established or reserves are not funded, because the useful life of the component cannot be determined;

d. As of the beginning of the fiscal year for which the budget is prepared, identify the current amount of accumulated funds for each reserve component or, if the pooling method is  used, the amount of the accumulated pooled funds;

e. Provide a description of the funding plan for the reserve funding obligations of the association, including the  use of regular assessments, special assessments, and any other  alternative funding method; and  

f. Provide a description of the procedures used for the estimation and accumulation of reserves pursuant to this  paragraph, the identity of any independent third party who  conducted the reserve study on behalf of the association, and  the extent to which the association is funding its reserve  obligations consistent with the reserve study currently in  effect.

 5. Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts, and may be used only  for authorized reserve expenditures unless their use for other  purposes is approved in advance by a majority vote of all voting  interests, voting in person or by limited proxy at a duly called meeting of the association; provided that the use of reserve  funds for a purpose other than authorized reserve expenditures  is authorized in the exercise of the association’s emergency  powers under s. 718.1265. Before turnover of control of an association by a developer to unit owners other than the  developer pursuant to s. 718.301, the developer-controlled association may not vote to use reserves for purposes other than  those for which they were intended without the approval of a majority of all nondeveloper voting interests, voting in person or by limited proxy at a duly called meeting of the association.

6.a. The only voting interests that are eligible to vote  on questions that involve waiving or reducing the funding of  reserves, or using existing reserve funds for purposes other than purposes for which the reserves were intended, are the  voting interests of the units subject to assessment to fund the  reserves in question. Proxy questions relating to waiving or reducing the funding of reserves or using existing reserve funds for purposes other than purposes for which the reserves were  intended must contain the following statement in capitalized, bold letters in a font size larger than any other used on the  face of the proxy ballot: 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.

b. If the association has voted to waive reserves or to use  existing reserve funds for purposes other than the purposes for which the reserves were intended, the budget must contain the  following statement in conspicuous type: THE OWNERS HAVE ELECTED  TO WAIVE RESERVES, IN WHOLE OR IN PART, OR ALLOWED ALTERNATIVE Florida Senate - CS for CS for SB 1702 595-03329-22 20221702c2 Page 40 of 89 CODING: Words stricken are deletions; words underlined are additions. USES OF EXISTING RESERVES UNDER SECTION 718.112(2)(f), FLORIDA  STATUTES. THE WAIVING OR ALTERNATIVE USE OF RESERVE FUNDS MAY  RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED  SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.

c. On or after January 1, 2026, if the association is required to perform a reserve study under this paragraph and the  budget of the association does not fund the association’s reserve obligations consistent with the reserve study currently  in effect, the budget must also contain the following statement  in conspicuous type: THE ASSOCIATION’S LAST RESERVE STUDY IS  DATED ..... THE RESERVE AMOUNT BUDGETED AND/OR COLLECTED IS LESS  THAN REQUIRED BY THE RESERVE STUDY SCHEDULE. FAILURE TO FUND  RESERVES CONSISTENT WITH THE ASSOCIATION’S RESERVE STUDY MAY  RESULT IN UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.

 

 

 

Additional State Reserve Study Laws