Before you know it, 2014 will be here. Many associations end their fiscal year on December 31st. With that in mind, this is a great time to review the financial reporting requirements.
Within 90 days after the end of the fiscal year, or annually on such date provided in the bylaws, the association must have prepared a financial report on the financial activities of the preceding fiscal year. Within 21 days after the financial report is completed, but no later than 120 days after the end of the fiscal year, the board must provide each member with a copy of the financial report or, at a minimum, provide written notice that a copy of the financial report is available upon request, at no charge to the members.
The financial report must consist of a complete set of financial statements prepared in accordance with generally accepted accounting principles. The level of financial reporting that must be prepared by the board is based on the total annual revenue (including reserves) of the association, as follows:
1. An association with total annual revenues of $150,000 or more, but less than $300,000, shall prepare compiled financial statements.
2. An association with total annual revenues of at least $300,000, but less than $500,000, shall prepare reviewed financial statements.
3. An association with total revenues of $500,000 or more shall prepare audited financial statements.
4. An association with total annual revenues of less than $150,000 shall prepare a report of cash receipts and expenditures.
Interestingly, if the board desires to raise the level of financial reporting, it may be increased without membership approval by board action alone, unless the governing documents provide otherwise. In addition, if the board is not inclined to approve a heightened level of reporting, but the members want to do so, then upon twenty (20%) percent of the parcel owners petitioning the board to increase the level of financial reporting from that required by Statute for that fiscal year, the board must notice and hold a membership meeting within thirty (30) days of receipt of the petition. To raise the level of financial reporting, a majority of members present at such meeting must cast their vote in favor of doing so.
However, lowering the reporting threshold is a different matter entirely because only the members can make that decision. To accomplish this, a majority of members present at a properly noticed membership meeting must cast their vote in favor of lowering the level of financial reporting. The meeting must take place prior to the end of the fiscal year in question.
On a completely different note, and interesting nonetheless, just two weeks prior to turnover, the developer, in Courvoisier Courts, LLC v. Courvoisier Courts Condominium Assoc. Inc., a 2012 case decided by Florida’s Third District Court of Appeal (the “3rd DCA”), assigned the remaining limited common element parking spaces and storage spaces to one of its remaining units still for sale and thus still under the control of the developer. In brief, “common elements” are owned by all of the unit owners together in indivisible shares. Typically all unit owners have the right to use the common elements. On the other hand, “limited common elements” are a subset of the common elements where only particular unit owner(s) have the right of use associated with the limited common element at issue. For example, while the condominium parking lot is typically a common element (meaning all owners have the right to traverse it), the parking spaces may be limited common elements (meaning only the assigned unit owner has the right to use their assigned parking space).
In Courvoisier Courts, the association argued that the developer was required to turn over all of the remaining limited common elements as a part of the turnover requirement and that the developer’s right to the remaining parking and storage spaces terminated upon turnover. The trial court agreed with the association and ordered the developer to convey all limited common elements to the association. The developer appealed, and the 3rd DCA reversed the trial court’s decision.
In so doing, the 3rd DCA looked to the declaration of condominium and noted that “[a]ny parking spaces and storage spaces that have not been assigned by the time Developer has sold all Units owned by it will become common elements and become the property of the Association.” Since the developer assigned the remaining limited common element parking spaces and storage units prior to turnover, the court ruled in favor of the developer affirming controlling case law that provides a court may not violate the clear meaning of a contract in order to create an ambiguity.