Major Expenditures: The Questions a Board Should Answer Before It Commits the Money

Jason Hamilton Mikes, JD, MBA
Founder & Managing Shareholder

• Published September 25, 2026
• Reviewed by Jason Hamilton Mikes, JD, MBA, September 26, 2026
• Florida Statutes as of July 1, 2026
• Applies to: Condominiums · HOAs · Cooperatives

Large association spending goes wrong in predictable ways: the board had no authority to do the work, the funding was not there, the statutory bidding step was skipped, the scope came from the contractor, or the association paid ahead of the work and lost every means of holding the contractor to it. The questions below are the diligence sequence that catches those failures. Work through them in order, and put the answers in the minutes as you go.

Is this maintenance, or is it a material alteration?

This is the first question because it determines who decides. Maintenance, repair and replacement of what already exists is generally a board function, funded through the budget or a special assessment. A material alteration or substantial addition is a different animal and, in a condominium, requires an owner vote.

In a condominium, there may not be any material alteration of, or substantial addition to, the common elements except in the manner provided in the declaration. If the declaration does not specify a procedure, 75 percent of the total voting interests must approve before the work commences. In a cooperative the statute addresses material alterations and substantial additions in the context of approval by two-thirds of the total voting interests. Chapter 720 contains no general material alteration statute at all, so an HOA board is thrown back entirely on its declaration.

The line between repair and alteration is not always obvious. Replacing a flat roof with the same system is repair. Replacing it with a different system that changes the appearance or use of the roof may be an alteration. Courts have looked at whether the change is material in appearance or function rather than at cost alone. Our chapter guide to material alterations in a condominium works through the analysis, and this is a question to put to counsel early, because taking the vote after the contract is signed does not fix anything.

Do we have the authority and do we have the money?

Authority and funding are separate questions and boards often answer only the second.

1. Is the component ours to maintain? Read the declaration's maintenance allocation. Associations regularly pay for work on components that belong to owners, and that is a misuse of common funds even when everyone is grateful.
2. Does the board have spending authority at this level? Some documents cap what a board may spend without owner approval. Some caps are stated in dollars fixed decades ago and are effectively meaningless now, but they are still in the document.
3. What is the funding source? Operating surplus, reserves, a special assessment, a loan, or insurance proceeds. Each has different rules.
4. If reserves, are they the right reserves? Condominium reserve funds may be used only for authorized reserve expenditures unless a majority of all the total voting interests approves another use in advance. In an HOA the equivalent approval is a majority vote at a meeting at which a quorum is present.
5. If a special assessment, has it been properly noticed? Run the process in our guide to planning a special assessment before you commit to the contract, not after.

Write down the answer to each of these in the board packet. A director who cannot say which pot of money is paying for a $1.2 million project should not be voting on it.

Did we bid it the way the statute requires?

All three chapters require competitive bids above a threshold, and the thresholds are not the same.

Two points boards miss. First, the threshold is a percentage of the budget including reserves, so a large reserve contribution raises the dollar figure at which bidding becomes mandatory. Calculate it once a year and put the number in the board's reference materials. Second, the exemption for design professionals is an exemption from the statutory bidding requirement, not a reason to hire the first engineer who calls. Interview several regardless.

There is a separate rule that catches boards by surprise. Under § 468.4335, when the association receives and considers a bid exceeding $2,500 to provide a good or service other than management services that is or may reasonably be construed to be a conflict of interest, the association must solicit multiple bids from other third-party providers. A violation makes the management contract voidable, and on termination the association owes only the reasonable value of services provided and no termination fee or liquidated damages. Know which of your vendors are affiliated with your management company.

Who verified the scope?

On any significant repair or replacement, the association should pay a design professional to write the specification, run the bid, and later administer the contract. That cost is typically a small percentage of the project and it is the single highest-value dollar the association spends.

The reason is structural. A contractor's proposal is a sales document. It describes what the contractor proposes to sell, with exclusions written to protect the contractor. Bidding a contractor's own proposal against two others produces an apples-to-oranges comparison and gives the association no independent basis for judging change orders later.

Ask the engineer or architect, in writing, four things: what is the condition, what is the recommended scope, what is the expected service life of the recommended repair, and what is deliberately excluded. Keep the report. It is the foundation of the board's business judgment defense and, if there is a construction defect claim later, it is evidence. Our guide on engineering and construction contracts covers the professional agreement itself.

What does the contract say about changes and delays?

Read these clauses before signing, because they are where large projects actually go wrong.

• Change orders. Require them in writing, signed before the work is performed, with a price and a schedule impact stated. Say who on the association side may sign, and cap that authority. A board that delegates unlimited change order authority to one director or to the manager has delegated the budget.
• Unit prices. For repair work where the quantity is unknown until demolition, fix unit prices in the contract for the likely extras: square feet of spalled concrete, linear feet of sealant, each window. That settles the price before the moment when the association has the least bargaining power.
• Allowances. If the contract carries an allowance, say what happens to unused allowance money. It should come back to the association.
• Schedule and delay. A start date, a substantial completion date, what counts as excusable delay, and what happens if the contractor is late. Liquidated damages are worth discussing where delay has real cost.
• Suspension and termination. The association's right to stop the work and the consequences of doing so.
• Warranty. Duration, what is covered, who holds the manufacturer's warranty, and whether it survives a change of contractor.
• Dispute resolution. Where a dispute is heard and under what process. Note that a construction defect claim by an association representing more than 20 parcels or units carries a longer presuit notice period than an individual claim.
• Lien protection. Notice of commencement, releases of lien with every payment, and a final contractor's affidavit before final payment.

None of this is unusual, and a competent contractor will expect it. A contractor who resists a written change order process is telling you something useful.

Who inspects the work and who certifies payment?

Separate the three roles: the contractor performs, the design professional certifies, and the association pays. Payment should follow certification, never the other way round.

1. The contractor submits an application for payment showing work completed to date against the schedule of values.
2. The engineer or architect inspects, adjusts the application if the work is not in place, and certifies the amount payable.
3. The association verifies that releases of lien covering the prior payment are in hand from the contractor and from subcontractors and suppliers who have served notice.
4. The association pays the certified amount less retainage.
5. Final payment is released only after final completion, punch list closure, the final contractor's affidavit, final releases, and delivery of warranties and closeout documents.

Retainage exists to give the association something to hold at the end of a project, which is precisely when its bargaining position is weakest. Do not release it early because the contractor asks. Do not let a director hand-carry a check to a job site. And never pay a large deposit against work not yet performed without understanding that the money is effectively unsecured.

What insurance and bonds are in place?

Require certificates before work begins, not after, and read them rather than filing them.

• General liability at limits appropriate to the project, with the association named as an additional insured on a form that covers ongoing and completed operations.
• Workers' compensation covering everyone on site, including subcontractors, or proof of a valid exemption.
• Automobile liability for vehicles on the property.
• Professional liability for the engineer or architect, which a general liability policy does not provide.
• Payment and performance bonds on large projects. A payment bond furnished by the contractor in at least the amount of the original contract price and attached to the recorded notice of commencement protects the association against liens from unpaid subcontractors and suppliers. A performance bond gives a surety's obligation to complete if the contractor fails.
• Builder's risk where the project exposes the building during construction, and confirmation from the association's own carrier that the work does not void coverage.

Also confirm the contractor's Florida license is current and in the right category for the work, and that the person listed as qualifier is actually running the job. Ask your insurance and indemnification review questions at the same time, since the indemnity clause and the insurance requirements have to work together.

What should the minutes record?

The board's legal protection for a large expenditure is the business judgment it exercised, and the evidence of that judgment is the record. Minutes should be brief, but on a major expenditure they should show the following.

• The professional report or recommendation the board relied on, identified by author and date.
• How the work was bid, how many bids were received, and from whom.
• The reason the selected contractor was selected. If it is not the lowest bid, say why in one sentence.
• The funding source and the authority for using it, including any owner vote taken.
• Any conflict of interest disclosed and how the board handled it.
• The motion as adopted, with the contract amount and any not-to-exceed figure, and the vote.

Keep the bid tabulation, the professional's report and the executed contract in the official records. Financial records supporting the expenditure have their own retention requirement, and project oversight during construction generates its own file of certifications and change orders that belongs with them.

Contact Hamilton Mikes

Hamilton Mikes reviews construction and vendor contracts for association boards throughout Southwest Florida, confirms bidding and alteration authority before a board commits, and works alongside the association's engineer through closeout. Call 239-594-7227 or visit our Construction page.