The increase in costs, especially insurance premiums, have been difficult for condominium associations in the past couple of years. I have been asked on many occasions if there is a cap on increasing the budget by more than 115% from the previous year.
Section 718.112(2)(e)(2)(a), Florida Statutes, provides a procedure to be followed if the annual budget requires assessments against unit owners in excess of 115% of the preceding fiscal year if timely challenged by Unit Owners. If it is not timely challenged by a Unit Owner, then the budget continues as adopted regardless of the amount of the increase. If the budget is timely challenged, those challenging would have to obtain the approval of a majority of the Members to approve a revised budget; otherwise the budget adopted by the Board continues in effect.
However, Chapter 718 provides for exclusions from the 115% calculation. Section 718.112(2)(e)(2)(b), Florida Statutes, provides:
b. Any determination of whether assessments exceed 115 percent of assessments for the prior fiscal year shall exclude any authorized provision for reasonable reserves for repair or replacement of the condominium property, anticipated expenses of the association which the board does not expect to be incurred on a regular or annual basis, insurance premiums, or assessments for betterments to the condominium property.
Therefore, costs such as the insurance premiums, reserves required pursuant to a structural integrity reserves study and other reserves required by Chapter 718 are not part of the calculation when determining if the assessments in a given year exceed the prior year’s assessments by 115% percent or more. The exclusion for “insurance premiums” was recently added to the statute this year due to the exorbitant costs of insurance premiums that all condominium associations have been facing. Most increases in the budget relate to these excluded items. If the increase in the budget is due to these excluded factors, then the budget cannot be contested by Unit Owners and the budget adopted by the Board remains in effect.
There may also be provisions in your governing documents that must be reviewed in conjunction with the statutory provisions, therefore, when these issues arise, consult with your community association attorney.
