“Condominium Budgets, Reserves, and Insurance, Oh My!” – FLCAJ Magazine
As budget season approaches for condominiums, it would behoove the association to start a little earlier this year. Thanks to House Bill (HB) 913, there are numerous changes to Chapter 718. This bill was signed by the governor on June 23, 2025, and went into effect on July 1, 2025.
As a preliminary matter, Section 718.112(2)(e), Florida Statutes, has been amended to provide budget meetings may be conducted by video conference. Video conference has been defined in Section 718.103 by adding subsection (33) and is it defined to mean
“…a real-time audio and video-based meeting between two or more people in different locations using video-enabled and audio-enabled devices. The notice for any meeting that will be conducted by video conference must have a hyperlink and call-in conference telephone number for unit owners to attend the meeting and must have a physical location where unit owners can also attend the meeting in person. All meetings conducted by video conference must be recorded, and such recording must be maintained as an official record of the association.”
It is important to note that all meetings conducted by video conference MUST also have a physical location so that unit owners have the option to attend in person.
Chapter 718 still requires that notice of the budget meeting be hand delivered, mailed, or electronically transmitted (to those unit owners who have agreed to receive notice via electronic transmission) along with a copy of the proposed budget. In the past I have written articles stating that exceeding 115 percent of the assessments for the preceding fiscal year carried little risk since the unit owners had to contest the budget within a specific limited period of time and a majority of the members had to approve a revised budget. HB 913 has fundamentally changed this provision.
Under HB 913, if a board proposes an annual budget which exceeds 115 percent of the prior year’s budget, the board must simultaneously propose a substitute budget that does not include any “discretionary expenditures that are not required to be in the budget.”
As a first step, the board must look to whether the proposed budget actually exceeds 115 percent of the prior year’s budget. The items to be excluded in this calculation have been slightly modified by HB 913; however, key expenses such as insurance premiums and mandatory reserves are still excluded from the 115 percent calculation. Associations will need to discuss with their managers, attorneys, and certified public accountants (CPA) whether any additional expenses can be calculated as part of the exclusion from the 115 percent increase. It is important to note that HB 913 amends §718.112(f)2.a, Florida Statutes, regarding mandatory reserves. This section has always provided that the association must reserve for any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000. The reference to $10,000 has been deleted and substituted with “…$25,000 or the inflation-adjusted amount determined by the division under subparagraph 6., whichever is greater…”
If it is determined that the association’s proposed budget exceeds 115 percent of the budget for the preceding year, then both the board’s proposed budget and a “substitute budget” without the “discretionary expenditures” must be sent to unit owners at least 14 days in advance. A unit owner meeting must be held to vote on the substitute budget before the board convenes to adopt its proposed budget. Chapter 718 does not define what are “required” versus “discretionary” expenses; therefore, the board will once again need to consult with its manager, its CPA, and quite possibly its attorney to assist in making this determination.
A unit owner meeting must be held to vote on the substitute budget before the board convenes to adopt its proposed budget. Therefore, if the unit owners vote to approve the “substitute budget,” that is the adopted budget. If the unit owners reject the substitute budget, then the board meets to approve its proposed budget. The substitute budget requires approval by a majority of voting interests or any greater percentage specified in the bylaws. Associations should consult with their attorneys to determine whether amending the bylaws to require a greater percentage is a good option for the association.
As set forth above, insurance premiums are excluded from the calculation as to whether a proposed budget exceeds 115 percent of the budget for the preceding year; however, I am often asked whether the association has to include insurance premiums as part of the budget or whether the association can specially assess for the insurance premiums. Section 718.112(2)(f), Florida Statutes, still provides as follows:
- “(f) Annual budget.—
- 1. The proposed annual budget of estimated revenues and expenses must be detailed and must show the amounts budgeted by accounts and expense classifications, including, at a minimum, any applicable expenses listed in s. 718.504(21)…”
Section 718.504(21), Florida Statutes, provides the budget shall contain “…estimated items of expenses of the condominium and the association, except as excluded under paragraph (b), including, but not limited to, the following items, which shall be stated as an association expense collectible by assessments or as unit owners’ expenses payable to persons other than the association:…” One of items listed as an expense for the association is insurance. Therefore, insurance premiums should be included as part of the annual budget.
With all these burdensome new laws in HB 913, I would like to end on a positive note. Section 718.111(13), Florida Statutes, Financial Reporting, has been amended to give the association 180 days, as opposed to 120 days, after the end of the fiscal year or other date provided in the bylaws, to deliver to unit owners via mail, personal delivery, or email/facsimile (if the unit owner has consented to email or facsimile delivery of notices) the most recent financial report. HB 913 does add, however, evidence of compliance with this requirement must now be made by an affidavit executed by an officer or director of the association.
To read the original FLCAJ article, please click here.
Elizabeth “Beth” A. Lanham-Patrie has been practicing law since 1993, and she has focused on representing community associations since June 2001. Beth provides a variety of legal services to condominium, homeowner, and cooperative associations and is a transactional attorney with extensive experience drafting and amending governing documents and preparing and reviewing contracts. Beth is also involved in resolving disputes between associations and owners. Ms. Lanham-Patrie is also one of only 190 attorneys statewide who is a board-certified specialist in condominium and planned development law. For more information email bpatrie@beckerlawyers.com, call 407-875-0955, or visit www.beckerlawyers.com.
