“2025 Changes to Condominium Laws Explained – Part Two” – News-Press
Today’s column is the second installment of our annual review of new legislation affecting Florida community associations, which became effective July 1, 2025. One of the most significant changes involves the annual budget process.
Pursuant to the new statute, if a condominium association board proposes an annual budget which exceeds the prior year’s budget by 115 percent or more, the board must simultaneously propose a substitute budget that does not include any “discretionary expenditures that are not required to be in the budget.” Previously, if a proposed budget exceeded 115 percent of the prior year’s budget, unit owners had to petition the board to present the unit owners’ substitute budget for approval, which rarely happened.
Under the new law, boards must proactively provide a substitute budget for owner vote at the same time as the budget that is typically proposed and adopted by the board. There are two key factors boards must consider.
The first question is whether the board’s proposed budget exceeded 115 percent of the prior year’s budget. Certain expenses, such as insurance premiums, mandatory reserves, and anticipated repair costs for specific building components which are not expected to be incurred on an annual basis, are excluded from this calculation.
The second question, for which the statute offers no definitions or guidance, are what expenditures qualify as “discretionary.” The Florida Condominium Act does not define “required” versus “discretionary” expenditures. The Act does mandate that certain expense categories be included in the budget, and many condominium documents outline required services and authorized expenditures.
If a board determines that its proposed budget exceeds 115 percent of the prior year’s budget, both the board’s proposed budget and the “substitute budget” without the “discretionary expenditures” must be sent to unit owners at least 14 days in advance (some old condominium bylaws require 30 days’ notice for budget meetings and this would still need to be followed). A unit owner meeting must be held to vote on the substitute budget before the board convenes to adopt its proposed budget.
In other words, if the owners vote to approve the “substitute budget,” that is the adopted budget. If the members reject the substitute budget, then the board meets to approve its proposed budget. The substitute budget requires approval by a majority of the entire voting interests (not just those who vote), or any greater percentage specified in the bylaws.
Another change involves the investment of association funds. Subsection (a) of new Section 718.111(16) of the Florida Condominium Act provides that a board shall, in fulfilling its duty to manage operating and reserve funds of the association, “use best efforts to make prudent investment decisions that carefully consider risk and return in an effort to maximize returns on invested funds.” I would have said that this was the law before the new statute, although the “best efforts” requirement is arguably a heightened legal standard.
Subsection (b) of the new statute is particularly noteworthy and applies only to the investment of reserves. The new law states that an association “may invest reserve funds in one or any combination of certificates of deposit or in depository accounts at a community bank, savings bank, commercial bank, savings and loan association, or credit union without a vote of the unit owners.” Again, I would have said that this was already the law, without the necessity of this “change.”
Perhaps more important than what the new law says, is what it does not. It does not address the fundamental question of whether a condominium association can place its funds in any instruments other than “certificates of deposit” or “depository accounts,” nor does the law describe what a “depository account” is. Since the board can invest in these instruments without an owner vote, can it invest in other instruments with an owner vote? If an owner vote is required, what is the vote required to approve?
As with the type of instruments in which association funds may be placed, does the statute permit associations to use other financial entities, such as traditional investment brokerage firms that are not “banks”? Is an owner vote required to permit this and what is the voting requirement?
Stay tuned for further reporting on the new laws.
Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com. Past editions may be viewed at floridacondohoalawblog.com.
