We live in a small community that has been plagued for years by a 25% delinquency rate. However, through frugal budgeting and collecting from banks on the foreclosed homes, the board finally had a surplus so it lowered the HOA dues this year. This year's budget still provides for a couple thousand dollars in surplus funds which the board labeled as a miscellaneous account for unplanned expenses. The board provided the statutory notices that there were no specified reserve accounts, but now a homeowner is arguing that because the HOA is a non-profit, there should be no surplus at all. Is it illegal for the board to carry over funds and set them aside for unplanned expenses? It seems very risky for the board to take the account to $0 every year when an emergency could arise.
Residential Real Estate Lawyer
The non-profit status of an association is not governed by the HOA Act, Fla. Stat. 720. This is an IRS matter. The HOA is not required to have a $0 balance at the end of the year, but does have to be careful about showing a profit (which is not the same as having $0 leftover) and cannot distribute excess funds to shareholders or members. The HOA should check with a CPA to ensure compliance with the IRS Code.
This communication is not intended to create an attorney/client relationship. It is always recommended you consult an attorney in person to discuss your case. The Law Offices of Stage & Associates practices state-wide and represents homeowners and community associations. Please visit our website at www.stagelaw.com.