Basic requirements of Florida HOA budget meetings
Homeowners Associations (HOAs) in Florida must hold annual budget meetings that provide an opportunity for their members to participate in the budgeting process and familiarize themselves with the association’s financial position. Usually held once a year, these meetings allow for member notification and review of the proposed annual budget and a chance to comment on the budget and decide how the costs of association operation will be allocated.
Florida law requires board members of the association to adopt the budget and set the assessments for the following year at a meeting of the board, which must generally be open to the membership, unless otherwise allowed under the Florida Statute for HOAs (FS 720). This is the board’s obligation under Florida Statutes to conduct and give the membership access to the financial planning and budgetary process of the association .
The annual budget sets forth the average cost of maintaining the association items, such as professional management services, servicing the association loan, landscaping, utilities, recreation facilities, insurance, and other common costs of operating the community. It serves the purpose of telling the entire membership called the "delegates" how their assessments for the following year are being allocated to various association expenses. This notification and review process is required under FS 720.303(3) and Section 7 of the Bylaws. The association board also has the obligation to provide its members with a financial report and an audited copy of the accountant’s report and to follow the specific notice requirements of FS 720.303(2)(b).
HOA legal requirements for budget meeting notice
In accordance with Florida’s HOA Act, the Board of Directors of a home owners association ("HOA") has the responsibility to adopt an annual budget. Section 720.303(2)(a), Florida Statutes ("F.S."), requires each association to prepare an annual budget. The proposed budget shall include:
In Florida, prior to the annual membership meeting where the budget is adopted by the members of the HOA, the Board must provide each member of the association with notice of the proposed budget "which itemizes in reasonable detail all sources of revenue and expenditures" for the association. F.S. §720.303(2)(b). This notice must be mailed or delivered to all members and must be "hand-delivered or mailed by United States mail, or electronically transmitted to all members entitled to vote thereon at least fourteen (14) days before the annual meeting." Id.
If the membership rejects the proposed budget during the membership meeting, the current budget, or last approved annual budget of the association, remains in effect until a subsequent budget is approved by the membership. Id. Further, F.S. §720.303(2)(b) permits the board of an HOA to levy a special assessment which may be included "in the budget of the following year, whether or not the assessment is payable in one installment or installments, to fund projects, including, but not limited to, capital expenditures, deferred maintenance items, or loans."
HOA budget meetings improper notice consequences
If a homeowners association fails to properly provide the statutorily mandated notice of the budget meeting it runs the risk that the proposed budget could be invalidated. Florida law provides that members of a homeowners association may commence a statutory civil action or an action at law in the circuit court for the purpose of obtaining a declaratory judgment or a temporary or permanent injunction as a result of noncompliance with the provisions of Chapter 720, Florida Statutes (the Homeowners’ Association Act). Section 720.305(1), Florida Statutes, provides that a:
No action shall be filed until the procedures established under ss. 720.311 and 720.303(1)(d) have been exhausted. It is an affirmative defense in any action filed pursuant to this section that the election was properly conducted in accordance with the procedures proscribed in this section and ss. 720.311 and 720.303(1)(d).
The application of penalties against the directors of an improperly noticed meeting is less clear. Under Florida law, directors have a fiduciary duty to the members of the association. Failure by a director to perform their duty can give rise to liability to the association. Section 720.303(1)(b), Florida Statutes, also discusses the concept of "willful failure" and provides:
Notwithstanding the provisions of paragraph (a), a member of the board, committee, or representative designated by the board is subject to civil penalty as provided in s. 720.305(1)(b) and may be removed from office or restrained from further participation in the affairs of the community by the circuit court if the court finds that such member is in willful violation of this section. The party seeking to enforce section 720.303(1)(b) must prove that the violation of section 720.303 was a "willful failure" of the board of directors. Thus, we should also consider the consequences of the improper notice when that notice is given by a condominium management company. In other words, where the association relies on the notice as drafted and distributed by their property management company and that notice has deficiencies, who bears the blame? The answer is that it is unlikely the association can avoid its liability by shifting the blame to the management company. Still, under most circumstances, the Association will have recourse against the Management Company for failing to make sure the notice on the agenda was compliant with Florida law. For the Association that means having to take the time to review each agenda item and make sure that each item listed is proper and contains enough information for its membership to consider what is being proposed. This may mean reconsidering how the notice is delivered to residents and lobbying for SB 1616, which would eliminate the agenda notice requirement.
HOA budget meeting proper notice best practices
Florida’s open and concurrent meeting requirements do not apply to budget meetings. However, we believe that they should be subject to the broader agenda and notice rules requiring "written notice of any meeting" to be mailed to or hand delivered to the owner and posted in the same manner as required for meetings of the association.
A budget is perhaps the most important action by a homeowners association. Owners within the community have a vested interest in budgets since those budgets determine the amounts of assessments each owner will pay. Every owner in a community is impacted by every budget. Accordingly, it is appropriate to afford owners with substantial notice regarding the details of each budget meeting.
Below are some best practices for providing budget meeting notices:
Communicate frequently. While a minimum of 14 days before the meeting, an HOA should always communicate its intention to adopt a budget at least 30 days prior to a meeting , if not 45 days. Just as importantly, there should be a clear and consistent method of communicating to owners on the status of the budget throughout the entire process.
Guidance from the previous year. If an HOA does not do a good job of providing open budget meetings and prior year financial information, it should not expect owners to participate in budget meetings. If participation is low, the HOA should take this into consideration for the subsequent year and email owners requesting their suggestions or concerns.
Accessibility. Some associations will hold their budget meetings after giving notice to that effect thereby providing owners less than 14 days notice. While technically compliant with the bare minimum requirements of Florida law, we believe this may violate the spirit of the law and serves only to "check the box" that a meeting was held.
Overall, we encourage all communities to go well beyond the bare minimum requirements. The best practice calls for owners to be informed.
Legal help for HOA meetings
While understanding the nuances of the notice requirements that must be satisfied by the board in advance of a budget meeting can be challenging, today’s boards benefit from easy access to information, whether through their association management company, legal counsel, or online resources such as Florida HOA & Condo Law Blog.
Association managers are an invaluable resource. Under the board’s authority, the manager is often responsible for drafting the first version of the proposed budget. Managers have a thorough understanding of the major components of their associations’ budgets and are sophisticated enough to provide alternatives and revise the budget as directed by the board. Many managers have direct relationships with reserve analysts who can provide reserve studies specific to the association’s community which, as noted above, can be invaluable to the budgeting process.
In addition to their customary role of advising the board in connection with budget issues, a number of legal firms across the state are members of the Florida Communities of Excellence in their local areas. COFE’s panel of legal experts is available to answer common questions from associations and boards on relevant topics. COFE also provides opportunities for boards to attend programs at no cost to them.
Another free service offered by COFE is the Florida Communities of Excellence Community Association Best Practices Resource Library. This area of the COFE website contains guides and links to resources and information that can help boards evaluate their effectiveness in various aspects of association governance, including association and board financial management. For instance, Model Policy 3.6 Expending Reserve Funds: Process establishes a process for a board to consider and approve the expenditure of funds in excess of the amount budgeted to a reserve under certain circumstances. This model policy may help boards comply with the requirement imposed by section 720.303(6)(e) of the Florida Statutes that each expenditure of 20% or more of the budgeted amount plus 5% is approved by a majority of the board present at a properly noticed meeting. Model Policy 6.3 Association Budget Surplus outlines a process for boards to follow when an association’s budget results in a surplus of cash. In compliance with section 720.303(2)(a)3. of the Florida Statutes, the policy requires that the board adopt a resolution at a properly noticed meeting to refund, rebate, or credit the surplus against the current year’s assessment against each unit owner.
Finally, as the COFE Library states, the tools and resources contained within it should not be viewed as legal advice and do not constitute a substitute for consulting with qualified association counsel. The Florida HOA & Condo Law Blog is an excellent place to find links to recent articles published by attorneys around the state on issues affecting associations, including reserve funding strategies, collection methods, and director and officer insurance issues.
Hoa meetings FAQ
Must an HOA board post their proposed budget on its website?
Generally, no. Florida Statutes only require condominium associations to post a copy of their proposed budgets on their websites. While there are a few exceptions to this general rule, it appears that the exceptions are limited to when the proposed budget contains special assessments, is scheduled to be heard at a meeting, or contains either lump sum or special assessments for the purchase of real estate by a condominium association.
How much notice must an association give before adopting its budget?
Not less than 14 days prior to the board meeting where the proposed budget will be adopted.
Must the proposed budget be mailed to the members?
Yes. The members of the association must receive notice of the proposed budget at least 14 days prior to the board meeting where the proposed budget will be considered and adopted by the board. The notice must include a copy of the proposed budget , as well as any notice of the time and place of the meeting, in which the proposed budget will be considered.
What does Florida law require to be included in the notice?
Florida law requires that the mailed notice include the following: 1. A statement that the proposed annual budget has been proposed by the board of directors; 2. A statement that the assessment against members is going to increase if the members do not approve the proposed budget; 3. Time, date, and place the board is scheduled to consider the proposed budget; and 4. A copy of the proposed budget that was mail directly to each member of the association.
Must the members approve the proposed budget, or can the board just adopt the budget?
If the board of directors wants to increase the assessment to members beyond ten percent, the board must first give notice to the members that the budget is going to be considered for ratification, and then the members of the association must approve the proposed budget, or it will be deemed approved.