There were several revisions to Chapter 720, which went into effect July 1, 2021. One of these revisions was to Section 720.303(6)(c) and (d), Florida Statutes. The revisions to this Section now provide, in part:
- An association is deemed to have provided for reserve accounts upon the affirmative approval of a majority of the total voting interests of the association and such reserve accounts would be considered “mandatory.”
- Reserve accounts are no longer considered “mandatory” if reserve accounts “have been established by the developer.” However, reserve accounts are considered “mandatory” if the declaration, articles, or bylaws (the “Governing Documents”) obligated the developer to create reserve accounts.
- Reserve Accounts Approved by a Majority of the Total Voting Interests:
The first issue for an association to consider is whether the members have voted, by a majority vote, at any time in the past to fund a specific reserve account. If they have not, then the association must consider a second issue, which is whether reserve accounts are required in the governing documents.
- Reserve Accounts Required in the Governing Documents:
Prior to this 2021 change to Section 720.303(6), Florida Statutes, the board had to look not only at its governing documents, but also at budgets created by the developer to determine if the developer had established mandatory reserve accounts. Sometimes this was an impossible task because the community had been developed many years before and the original budgets of the developer were no longer in existence. In order to simplify the determination of whether reserve accounts are “mandatory,” associations now only have to look to their governing documents as to whether “mandatory” reserve accounts are required.A general reference to reserves in the governing documents would likely not be specific enough to require “mandatory” reserve accounts; however, if there is a reference to reserves in your governing documents, we recommend that you discuss with your attorney whether the reserve accounts are “mandatory” or “voluntary”. If the reserve accounts are mandatory, then the funds can only be used for specific purposes. If they are “voluntary”, this means that the board can pick the components for the reserve accounts, determine how much to fund the reserve accounts and determine how the funds will be used. There is no requirement for the Members to approve the use of the reserve funds for another purpose or to reduce the funding of such “voluntary” reserve accounts.