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Q
& A
Question:
I
owned rental property in
South Florida
. Prior to renters moving in, they had to be approved by the
board. I live in
Altamonte Springs
and asked about the board screening applicants who wanted to
rent a condo in my complex and was told this is illegal. My
nephew just bought a condo in Maitland and the HOA told him
if he wanted to rent it, they would have to screen the
renters. Is my HOA just blowing smoke?
P.P.
, Altamonte Springs
Answer:
The
Florida Statutes do not prohibit condo associations from
screening applicants who want to rent a condo from a unit
owner and even provide for charging a fee for processing the
application. However, an association cannot screen
applicants unless there is a provision in the bylaws,
articles of incorporation or declaration of covenants and
restrictions allowing for screening. If these documents do
not contain this provision, then the association is breaking
the law by screening.
Barbara
Billiot Stage, Esq.
Question:
We
successfully recalled our entire board. Our newly
elected board is now ready to start healing our community.
HOA
property was turned over to us, but how do we know we have
everything?
We have been meeting resistance.
Even requests for copies of
financial reports have failed.
We don't even have access to bank accounts until the
new board members sign cards that will give us access to
previous records.
We
knew this would be hard work, but I just wish we had
guidelines to help. We don't even know if the books are
correct. Should we have all books audited?
I'll start with these questions. Thank you for
your help
L.Z.
Answer:
All HOA documents are the property of
the association and not the board. Therefore, the previous
board has a duty to turn over all documents to the new
board. You should send each member of the previous board a
letter by certified
mail with return receipt requested, giving them a
deadline to provide the documents. If they do not comply,
you will most likely have to hire an attorney, unless you
can get cooperation from the State Attorney's Office in your
area.
You
should definitely have the books audited to make sure you
limit your liability as much as possible for a previous
board's errors.
Barbara Billiot Stage, Esq.
Question:
Audit of the fiscal year 05/06 year-end financial report was done by an accounting firm CPA that has worked for the condominium for over 10 years and has always provided accurate and timely reports. The board had shown on the monthly financial reports an entry: "due to reserves from operating account" up to $165,000. The audit returned showing $115,277 due to the reserves. The board does not accept this figure, thinking it is too high. The board and management company are reviewing the figures and say they are coming up with a figure for what is really owed to the reserves. The board has made such statements as, "The CPA who did the audit did not account for reserve expenditures and the audit was a year late." The board has never voiced any concern about the CPA's competency, accuracy, or any other reason for why the board wants a different figure. My position is that I, as an owner, will not accept any changes not done by a CPA in the audit figures. I will not accept figures of an audit done by a CPA but then changed by the board and management company. (Note when I let the board know my position, I got a really hostile reply.) Is the board allowed to change these audit numbers? Do we owners have to accept these changes?
Answer:
This
is a question that should be submitted to a CPA or a tax
attorney for an expert opinion; however, I will provide some
basic information. The real question that needs to be
addressed is the reason for funds due to the reserves from
the operating account. There are two reasons I can think of
for the operating account to owe funds to the reserves. The
first would be where assessments collected were credited to
the operating account and the portion of the assessments
that are for replenishing the reserves need to be
transferred to the reserves. This is a fairly common
practice. The second reason would be that the funds in the
reserves were used for purposes that should have been
covered by the operating account, which would be a violation
of Florida Statutes §720.303(6)(h) unless approved by a
majority vote at a board meeting at which a quorum is
present.
To answer your question,
it is necessary to explain the purpose of an audit. Not all
homeowners associations are required to prepare audited
financial statements. Only those associations with annual
revenues of $400,000 or more are required to prepare audited
financial statements. The purpose of an audit is to ensure
that there is no material misstatement of the
organization’s financial position and performance and to
ensure that the organization is following the Generally
Accepted Accounting Principles (“GAAP”).
Florida
statutes provide that the amount in reserves must be
maintained in accordance with a formula that is based upon
the useful life of the asset for which the reserve was
established and the replacement cost of that asset. The
association may adjust the replacement of reserves to
account for changes in the useful life of the asset or
changes to the cost of replacing the asset. While
the board cannot change an audited financial statement, if
it does not transfer the amount indicated by the CPA to the
reserves, the figures will need to be reconciled on the next
financial statement. Whether or not the board is allowed to
transfer a different amount is the ultimate question for a
CPA or tax attorney.
Barbara Billiot Stage, Esq.
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