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Condo Q&A: Does Fla. Law Require Competitive Bids?

Short answer: It does under some circumstances. Also: If an unexpected big expense comes up, can a condo board pay using money from its capital reserve and replace the funds later?

NAPLES, Fla. – Question: If a condo association has an unexpected repair or expense come up that was not budgeted for, is the board allowed to use money from the capital reserve accounts to pay the expense and then replenish the money later? If so, what are the legal requirements as far as notice, holding a meeting, etc.? – K.R., Fort Myers

Answer: Section 718.112(2)(f)(3), Florida Statutes states, in relevant part, “Reserve funds and any interest accruing thereon shall remain in the reserve account or accounts, and may be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a duly called meeting of the association.”

The Board would need to call a special meeting of the members to vote on this issue, with notice provided in accordance with your governing documents for such a meeting and/or as provided in Chapter 718, Florida Statutes (mailed, delivered, or electronically transmitted to the unit owners and posted conspicuously on the condominium property at least fourteen [14] days before the meeting).

The statute further requires that the proxies used to vote for any alternative use of the reserve funds must contain the following warning in capitalized, bold letters in a font size larger than any other used on the face of the proxy ballot:

WAIVING OF RESERVES, IN WHOLE OR IN PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.

Please also note that the only voting interests eligible to vote on the issue of using existing reserve funds for purposes other than the purpose for which the reserves were intended, are the voting interests of the units subject to assessment to fund the reserves in question.

So, for example, if there are separate reserves for the roof of only one building within a condominium complex, only the owners in that building would vote on using their reserves for another purpose.

Question: Our condominium association is in the process of taking on a major plumbing project, which is going to cost the association over a million dollars. A group of owners asked the property manager if there was bid process for the project, or an RFP, produced. We were told that the manager called around to a few plumbing companies in town, and only one could handle the scale of this project, so that company gave a quote and that is what they are going with.

I know that there are requirements for bidding these types of projects for a condo association, so my question is whether what was done (making a few phone calls but only getting one quote) is good enough to satisfy the bidding requirements? – K.G., Port Charlotte, FL

Answer: Section 718.3026, Florida Statutes governs the requirement for bidding out contracts in a condominium association. The statute requires that all contracts “for the purchase, lease, or renting of materials or equipment, or for the provision of services, requires payment by the association on behalf of any condominium operated by the association in the aggregate that exceeds five percent (5%) of the total annual budget of the association, including reserves, the association shall obtain competitive bids for the materials, equipment, or services.”

Therefore, unless $1 million is less than five percent (5%) of your association’s annual budget, the plumbing project will require competitive bidding.

However, subsection (c) of said statute provides, “This section shall not apply if the business entity with which the association desires to enter into a contract is the only source of supply within the county serving the association.”

If the company that gave your association the quote is truly the only plumbing company in the county that can handle the project, then obtaining another quote is not required.

It seems from your question that the board may have made other calls, but if there is another plumbing company in the county that could handle the project, the association should obtain a bid from that company as well. Obtaining at least two (2) bids would satisfy the competitive bidding requirement of the statute.

The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross, or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

© 2022 Journal Media Group, Avi S. Tryson, Esq., is partner of the Law Firm Goede, DeBoest & Cross.