Legal News You Can Use: 2025 - 2026 Community Association Legislative Update

2025-2026 COMMUNITY ASSOCIATION LEGISLATIVE UPDATE

Annual Budget Increases (Section 718.112 of the Florida Statutes)

Condominium associations are required to adopt an annual budget outlining proposed expenditures for the maintenance, management and operation of the association. However,

the statutes provide unit owners with certain rights to participate in the budget process if the proposed budget exceeds 115% of assessments for the preceding fiscal year. Recent legislative changes dramatically modify both the rights of unit owners and the procedures governing this process. Under the new laws:

» If a board proposes in any fiscal year an annual budget which requires assessments against unit owners which exceed 115% of assessments for the preceding fiscal year, the board must simultaneously propose a substitute budget to be considered by the unit owners that does not include any discretionary expenditures that are not required to be in the budget. ▪ Note – This marks a significant departure from previous law, which only gave unit owners the right to consider a substitute budget if at least 10% of all voting interests submitted a written request for a special meeting within 21 days of the board’s final adoption of the budget. Additionally, previous law did not require the board to prepare a substitute budget even if such a request was made. ▪ Note – The statutes do not define the term “discretionary” expenditure or otherwise clarify its intended meaning. However, a different portion of the Condominium Act (Section 718.504) identifies certain expenses that must be included in an association’s budget, and many governing documents outline required services and expenditures. Presumably, any expense that is not listed in the statute or required by the governing documents could be considered “discretionary,” but there is no definitive guidance on that point. » Any determination of whether assessments exceed 115% of assessments for the prior fiscal year shall exclude any authorized provision for required reserves for repair or replacement of the condominium property, anticipated expenses of the association which the board does not expect to be incurred on a regular or annual basis for the repair, maintenance or replacement of SIRS-related items, and insurance premiums. ▪ Note – The phrase “for the repair, maintenance, or

replacement of SIRS-related items” is a new addition to the statute. ▪ Note – Previous law excluded “reasonable” reserves (rather than “required” reserves) from the calculation used to determine whether a budget’s assessments exceeded 115% of assessments for the prior fiscal year. ▪ Note – Previous law excluded “assessments for betterments to the condominium property” from this 115% calculation. That exclusion has now been removed from the statute. » The substitute budget must be proposed at the budget meeting before the adoption of the annual budget. » At least 14 days before such budget meeting in which a substitute budget will be proposed, the board must deliver to each unit owner a notice of the meeting. » Unit owners must consider and may adopt a substitute budget at the meeting. » A substitute budget is adopted if approved by a majority of all voting interests unless the bylaws require adoption by a greater percentage of voting interests. ▪ Note – This provision raises several unresolved questions. For example, does this mean that unit owners will vote during a board meeting, or does it effectively transform the budget meeting into a hybrid board/ member meeting? Are unit owners permitted to vote at this meeting by proxy or through electronic voting? Can the unit owners adjourn the meeting if a quorum is not present or if insufficient votes are obtained? These and other uncertainties will likely require clarification through future legislative action or judicial interpretation. » If a substitute budget is not adopted, the annual budget previously initially proposed by the board may be adopted. ■

14 | Kopelowitz Ostrow Ferguson Weiselberg Gilbert