"For years there have been significant legal constraints on a condominium association’s ability to use reserve funds. In addition to the statutory requirement to obtain membership approval for non-designated reserve usage, the prevailing school of thought was that association funds could not be invested since investments can and do fail. A newly filed bill by Senator Jason Pizzo, SB 1490, could create a significant change in terms of an association’s ability to invest the community’s operating and reserve funds in depositories other than a traditional bank or savings and loan. The bill provides as follows: “Unless otherwise prohibited in the declaration, and in accordance with s. 718.112(2)(f), an association, including a multicondominium association, may invest any funds in one or any combination of investment products described in this subsection.”
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Wow. I think this bill is a terrible idea. Lawyers and managers are always trying to convince condo boards that they need to have adequate reserves. The temptation to under-reserve and spare owners higher assessments is strong and ever-present. Now this bill would add the temptation to try to make the money by riskier investments with potentially higher return than CDs. If they lose the reserves in the stock market, then where does the money come from to replace the roof? Answer: the owners' pockets, in the form of a special assessment that many owners might not be able to pay. And that can lead to foreclosures. So I think SB 1490 is a bad idea!
