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HOA Interfund Reserve Transfers Usually Board Prerogative March 30, 2015

Longwood, Seminole
HOA Interfund Reserve Transfers Usually Board Prerogative, Longwood, Florida

 

Question: Can the board of a homeowners’ association move monies from one reserve account to another, or for operating purposes, without membership approval? D.D. (via e-mail)

  

Answer: Section 720.303(6)(h) of the Florida Homeowners’ Association Act states that “statutory” reserve funds (this is the industry accepted legal “slang” term and not a term used in the statute itself)  and any interest accruing thereon shall remain in the reserve account or accounts and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a meeting at which a quorum is present.

In an HOA,  “statutory reserves” come into being in one of two ways. First, they can be “voted in” by majority vote of the entire membership. I have rarely dealt with an HOA who “voted in” mandatory statutory reserves.

The second type of “statutory reserves” are those reserve funds which the first owner-controlled board “inherited” from the developer-controlled board. In other words, if the developer set up reserve funds when it initially controlled the association, then those reserve funds are also “statutory reserves.”

Most HOA reserves are “non-statutory” reserves (meaning that they are not voted in by the members nor carried over from the developer). With “non-statutory” reserves, broad discretion is given to the board as to whether to include them in the budget at all, and if so, at what level to fund, and once funded, how the money is spent. The governing documents may also place limits on the board.

  


Posted by Becker & Poliakoff - By Joseph Adams on February 5th, 2015Posted in Budgets, Reserves & Financial, Reader Q&A


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