HOA Q&A: Can an Association keep deposits to use for inspection fees?

Editor’s note: Attorneys at Goede, DeBoest & Cross respond to questions about Florida community association law. With offices in Naples, Fort Myers, Coral Gables and Boca Raton, the firm represents community associations throughout Florida and focuses on condominium and homeowner association law, real estate law, litigation, estate planning, business law.

Q: I just moved into my home. I was shocked  to learn that money posted as a security deposit with the Association for work on my home is not wholly returned. The Association retains $300 of each deposit for its "inspection fees." Is the HOA required by law to return such deposits once the work is completed? --J.M., Hutchinson Island

A:  For HOAs operating under Chapter 720 Florida Statutes, as of Oct. 1, 2023, a new law on construction deposits went into effect.  The law is found in Section 720.303(8)(d) of the Florida Statutes.  It provides that if an Association collects deposits from a member for any reason, including to pay for expenses that may be incurred as a result of construction on the member’s parcel, such funds must be maintained separately and may not be commingled with any other association funds. Upon completion of the project for which the deposit was collected, the member may request an accounting of the deposit and the association must provide it with seven days of receipt of the request. All unused funds must be paid to the member within 30 days of completion of the project.  The primary purpose of the deposit is as security for any damage caused to the Common Area by the owner’s contractor.  While the law does not expressly provide that the Association can keep some portion as an “inspection fee," I question the legality of such a fee.  Without support for the inspection fee in the recorded governing documents I don’t think the Association can charge it.  Also, I believe a court would require the Association to demonstrate how the amount of the inspection fee actually relates to the time and effort incurred in doing the “inspection.”  This seems like an arbitrary amount designed to generate income for the Association.

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Richard D. DeBoest, Esq., is a Partner of the Law Firm Goede, DeBoest & Cross.  Visit www.gadclaw.com or to ask questions about your issues for future columns, send your inquiry to: [email protected].  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.

This article originally appeared on Treasure Coast Newspapers: HOA Q&A: Can an Association keep deposits to use for inspection fees?