Paying for Emergency Repairs to Florida Condominiums

Florida is synonymous with condominium living as a way of life. It’s also synonymous with hurricanes. Hurricanes have largely shaped Florida’s construction industry in that the building code is shaped and modeled after the construction of structure that can withstand the storms.  The building code creates certain high wind zones near the coastline that carry different requirement. Sometimes, however, the storm surge and winds can over-take structures and can lead to catastrophe to not only buildings but entire regions of the state of Florida. When this happens, condominium associations are required to act and act quickly.

As a result, Chapter 718 provides for certain emergency powers for Florida Condominium associations.   The association’s emergency powers are located in Section 718.1265 of the Florida Condominium Act and discussed in detail in my October 2017 blog posting.  Sometimes additional association emergency powers are also listed in an association’s declaration so you may want to check those as well so it is important to have a full understanding of the condominium governing documents.

There are only two sections of the emergency powers statute which refer to association funds.

  • Section 718.1265(1)(l), which states that “Regardless of any provision to the contrary and even if such authority does not specifically appear in the declaration of condominium, articles, or bylaws of the association, levy special assessments without a vote of the owners.”
  • Section 718.1265(1)(m), which states that ‘without unit owners’ approval, borrow money and pledge association assets as collateral to fund emergency repairs and carry out the duties of the association when operating funds are insufficient.”

As such, the options for an Association when faced with funding emergency repairs is the following: (1) special assessments; (2) borrow money; (3) utilize existing cash; or (4) utilize insurance proceeds.  Many associations want to know if they can pull from reserves to pay for emergency repairs.  The use of reserve funds to make up for operating account deficiencies is not allowed.  The general rule (or law I should say) on reserve funds is that funds in reserve accounts can only be used for the reserve item and cannot be used for any other purpose unless approved by a majority vote of the owners.  There is nothing in the emergency powers section of the Florida Condominium Act that changes this requirement.

Therefore, an option provided by the statutory emergency powers is for the Board to borrow money from a bank to make up for any deficiencies in the operating account.  Based on the amount borrowed, the Board can then levy a special assessment to pay back the loan (or wait for insurance payments).  However, the only way to obtain immediate money under the emergency powers is to borrow the funds from a bank or levy a special assessment.  Many banks will lend hurricane relief loans to businesses that are waiting for insurance payments. There is no emergency provision that allows the Association to dip into reserve funds to pay for non-reserve assets in an emergency without prior member approval by a majority vote.

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