Q: Can a condominium association’s operating funds be combined with the reserve money? My association has not moved money into the reserve account and out of the operating account in the last year. The money is there, it is just not in the right account. Is it permissible to keep the reserve and operating funds together? (D.R., via e-mail)
A: It depends.
Section 718.112(2)(f)2.a. of the Florida Condominium Act contains the requirement that the budget for the association contain reserves for capital expenditure and deferred maintenance. In addition to defining what reserves must be maintained, the statute provides that any reserve funds and the interest accruing thereon shall remain in the reserve account and may only be used for the authorized reserve purpose, unless their use is approved in advance by a majority vote of the total voting interests of the association. Beginning in 2025, certain reserves may never be used for other purposes, regardless of any owner vote.
Section 718.111(14) of the Act states that reserve funds may not be comingled with the operating funds except for “investment purposes.”
The Division of Florida Condominiums, Timeshares, and Mobile Homes, the administrative agency charged with regulating condominium associations, has also adopted administrative rules regarding reserves. Rule 61B-22.005 of the Florida Administrative Code states that if the association collects its operating and reserve assessments in a single payment, it will not be considered to have comingled the funds, provided that the reserve portion of the payment is transferred into a separate reserve account within 30 days of receipt of when the funds were deposited.
In essence, the money must be “moved into the reserve account” within 30 days of receipt. The funds may physically reside in the same account, as long as it is for “investment purposes” and the money is being separately accounted for using “accrual fund accounting.” Once money has been designated as being part of the reserve fund, it is subject to the general rule that it can only be used for the intended purpose, and cannot be used to address operating account cash flow needs unless that has been approved by a vote of the owners.
Q: Our condominium documents state that the board shall hold a regular meeting every two months and that membership meetings must be held in May and November. The board has not held meetings under this schedule. Is there a Florida statute that addresses this? (H.T., via e-mail)
A: Section 718.112(2)(c) of the Florida Condominium Act addresses board meetings and does not regulate the frequency of board meetings. The bylaw provision you cite is unusual, I do not believe I have ever seen a similar requirement. Obviously, unless and until amended, the board should follow the association bylaws.
Section 718.112(2)(d) of the Act states that an annual meeting must be held at the location provided for in the bylaws and if the bylaws are silent, at a location held within 45 miles of the condominium.
The requirement for two membership meetings apparently in your bylaws is also unique, it is again a requirement I have never seen. It sounds like your association would benefit from having its legal counsel update your bylaws and other condominium documents.