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Letter to the editor

Condos: Call for the heads of shady directors

By Richard White, Special to the Times
Published February 23, 2008

Q: Our condominium president awards contracts for big jobs to friends without seeking other bids. Recently she gave $50,000 to a guy who ran off with it without doing any work. He is still in town, but the president says the association lawyer advised that we not prosecute or sue. I doubt that the president has spoken to the lawyer. Our treasurer thinks we deserve to know the information and has disclosed the $50,000 loss. Other directors tried to cover up the loss, saying they know how to fix the situation and the loss should not have been reported to members. This is nuts! Is it also illegal?

A: If I lived in your association, I would be yelling from the rooftop for their heads. You and your neighbors should send letters to the board demanding the resignation of everyone except the treasurer. Then build your new board around your whistle-blower treasurer.

Contact the association's insurance agent to see whether your policy can cover the loss. Talk to the association lawyer for advice on suing the board for malfeasance.

The directors are fully responsible for the loss. They allowed the president to sign checks alone or to transfer funds unchecked. The directors are responsible for establishing polices to protect the funds of the association. If they fail and funds are missing, they have breached their fiduciary duty.

Establish a policy - why wasn't this done before? - requiring that two officers sign checks and that all bids and contracts be awarded by competitive bids approved at board meetings.

Reserve fund must be addressed annually

Q: Our condominium started a reserve fund two years ago and there is now more than $50,000 in it. I would like to reduce the amount in the account or stop funding it for a while since we have met our goal for the cost of a new roof. I was told that once you start a reserve fund, you have to continue. Is this correct?

A: You can find the statute requirements in FS 718.112 under budgets. The condominium board is obligated to establish a reserve budget each year to include roofing, painting and paving. Any item with a replacement cost that exceeds $10,000 must be included. Reserves are calculated by a formula: the replacement cost divided by the number of years of useful life. Each year the board must calculate the reserves and include it as part of the budget.

Funding the reserves is not a choice but a statute requirement. Only the members can change the reserve budget by a vote at a members' meeting not a board meeting. They must do so each year.

Get budget handbook from the state

Q: You often refer to the budget handbook published by the state. I've tried calling the Bureau of Condominiums for a copy without success. Do you have an address where I can write?

A: The book you refer to is Budgets & Reserve Schedules Made Easy. The free book is primarily for condos, but it is a valuable tool for homeowners associations as well. The address is Bureau of Condominiums, Attn.: Printed Materials, 1940 N Monroe St., Tallahassee FL 32399-1004. The phone number is (850) 488-1122. I urge every association to get a copy.

Richard White is a licensed community associations manager. Write to him c/o Community Living, St. Petersburg Times, P.O. Box 1121, St. Petersburg, FL 33731, ore-mail him at CAMquestions@cfl.rr.com. Please include your name and city. Visit him online at talkwithcam.com.

[Last modified February 22, 2008, 16:30:54]