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I Want a Refund!

12 May 2020

Are Residents Entitled to a Refund?

We have recently seen an increase of owners demanding a reduction of periodic (“regular”) assessments, due to Coronavirus/COVID-19-related closures or limited use of common areas/amenities (e.g., pools, gyms, clubhouses, etc.). These requests imply that the association should not seek the amounts needed to cover the year’s anticipated expenses as determined in the Board’s best business judgment (and in some cases, that of the members). Ostensibly, these owners ignore the purpose of assessments stated in the Declaration, and simply presume that assessments are compensation paid for use of these amenities. Use rights in common areas do generally accompany ownership and/or tenancy (rather than resulting from payment to the association); these rights are, however, subject to reasonable restrictions. Such a reasonable restriction could be, for example, limited use of amenities during a deadly pandemic, while social distancing is recommended by Florida and federal governments and the Centers for Disease Control. In short, reasonable restrictions on use rights in common areas do not affect the amount of regular assessments which were levied, or which are thus due to the association, for several reasons.

As mentioned above, regular assessments are a function of the association’s budget. The budget includes line items such as reserves, contractual expenses, and - crucial to the issue at hand - maintenance and repair of common areas/amenities. Florida law simply does not require that an association reduce its finalized, approved budget to account for reduced use of amenities (i.e., reduced “wear and tear”). Moreover, the cost of determining how much “wear and tear” was avoided may actually exceed the reduced use cost, meaning that these owners could end up with increased assessments due to their demands. Likewise, while not necessarily the subject of this article, the association’s contractual expenses (e.g., charges paid to management firms) do not automatically change, and may actually increase, as a result of the additional issues arising due to the Covid-19 pandemic; we have seen managers (including those customarily serving on-site) working even harder “behind the scenes” from remote locations due to all of the additional complications associated with the pandemic. Likewise, we have seen associations (wisely) seeking more legal guidance to ensure they are avoiding as much health and legal risk as possible during this pandemic. None of the owners described in this article seem to acknowledge these increased costs, which may offset or exceed the reductions they seek, even without a formal determination of the reduced “wear and tear” to amenities. Moreover, the actual change in costs would ostensibly be incorporated into the next annual budget, rather than impacting current assessments.

Moreover, the purpose for which regular assessments may be levied is generally not as compensation for use of any particular amenity. Rather, it is to ensure that those amenities are properly maintained and operated so that they can be used, repaired, and replaced as needed (again, subject to reasonable restrictions). Normally, an association’s charge for use (rather than maintenance) of common areas is limited to special or exclusive use of an amenity (e.g., a fee, separate from regular assessments, charged for exclusive one-time use of a clubhouse for a party).

In short, there does not appear to be any basis in law or equity (i.e., fairness) for these owners’ requests to reduce assessments which were levied to ensure the proper maintenance and operation of the community, in line with an approved budget. The assessments were ostensibly not levied to enable the use of amenities, and any reduction should follow and be based on a (potentially costly) analysis of the actual reduced cost of disuse, via either an amended budget (if such an amended budget is even authorized) or, more likely, a reduction of the following year’s maintenance line item for the amenities whose use was restricted. Associations should not arbitrarily reduce the assessments levied in accordance with their approved budgets, nor should payment be deferred indefinitely. See also Should We Cease Collecting Given the Coronovirus?