Condominium Special Assessments in Florida: Understanding the Business Judgment Rule
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Special assessments, under the Florida Condominium Act, are those assessments imposed against condominium unit owners, other than those assessments required by the association’s annual budget. See 718.103 (24) of the Florida Statutes. Regular assessments, on the other hand, are fees collected from condominium unit owners for the payment of common expenses of the association. See 718.103 (1) of the Florida Statutes. If a condominium board votes to pass a special assessment, such a decision will be subject to the business judgment rule. See Cedar Cove Efficiency Condominium Association, Inc. v. Cedar Cove Properties, Inc., 558 So. 2d 475 (Fla 1st DCA 1990). If that judgment is properly exercised, a Florida court will not supplement its judgment for that of the board.
The business judgment rule will protect association board of directors, so long as board members act in a reasonable manner. Stated another way, and with respect to repairs to common elements a condominium, “if, in the good business judgment of the association, such alteration or improvement is necessary or beneficial in the maintenance, repair, or replacement of the common elements, all unit owners should equally bear the cost as provided in the declaration, bylaws and statutes.” See Tiffany Plaza Condominium Association, Inc. v. Spencer, 416 So. 2d 823 (Fla. 2nd DCA 1982).
The condominium association’s governing documents, which include the Declaration, Bylaws and Articles of Incorporation, often address the mechanism for passing special assessments. The Florida Condominium Act mandates the notice requirements for passing a special assessment. See 718.116(10 of the Florida Statutes). Once the determination is made to vote on a special assessment, the association must provide written notice to each unit owner. The funds collected for such special assessment may only be used for the specific purposes set forth in that notice. Upon completion of the specific purpose of the special assessment, any excess funds will be considered common surplus and may, at the discretion of the association’s board, either be returned to the unit owners or applied as a credit toward future assessments.
Special assessments in condominium living are sometimes inevitable and, in some instances, can be a significant financial burden on unit owners. The need for a special assessment may be due to repairs to a building, including replacement of balconies and windows, stucco and/or waterproofing work, and even construction of a rock revetment on a beach. When building repairs were necessary to protect common elements, Florida courts have held that condominium unit owners could be assessed for the repair costs, without their consent. See Cottrell v. Thornton, 449 So. 2d 1291 (Fla. 2nd DCA 1984). In Cottrell, the board of the association specially assessed its unit owners $600 to remedy severe problems with the canal system, roadway system and pool. The court held that the action taken by the board was to protect the canal, pool and roads from further damage; thus, the assessment of the repair costs on all unit owners, without unit owner consent, was appropriate.
Similarly, in P.S. Farrington v. Casa Solana Condominium Association, Inc., the board of the association unilaterally approved bids for needed repairs to the exterior of the building. Certain unit owners filed suit to attempt to stop the passing of the special assessment for this work. The trial court concluded that the condominium documents allowed for such a special assessment because of the immediate or emergency need for repairs. After hearing the opinions of engineers, architects, and attorneys, the court concluded that the board properly used its business judgment in determining a special assessment was needed immediately.
In order to properly pass a condominium special assessment, a condominium board must exercise good business judgment, consult the condominium documents, as well as the Florida Condominium Act.