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Subject: HOA not allowing Budget amendments
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Author Messages
BillD15
(South Carolina)

Posts:9


11/29/2018 5:41 AM  
We had our HOA member annual meeting recently where we voted on the proposed budget for 2019. We received the proposed budget 30 days in advance of the meeting as required. I disagreed with the proposed fee structure for rental spaces in our neighborhood storage yard and tried to amend the budget (I got the floor and proposed the change). My change wouldn't affect the bottom line just the way the fees were allocated. The board wouldn't allow a binding vote on it. They did allow a show of hands to see who agreed with me, a vast majority did, but that was it.

Their argument for not allowing the line item amendment is based on a similar incident from last year where we tried to amend a budget line item. We were told then that we are not allowed to change the line items, only the bottom line per this email:
"An Attorney that represents 100's of Associations in multiple states has reviewed our Covenants and By Laws about amending the Budget. In summary, you can make a motion to amend the budget as it applies to operations and the assessment. Any changes to the budget are then transferred to the homeowners. What you may not adjust is the fees that the Boat Storage folks pay as that is considered an individual assessment and that role lays strictly with the Board of Directors. Their are 2 functions that the Board has authority over and that is fines and dues for members that use the amenities within the separate classification. The Boat storage revenue is reflected on the budget in a effort to have disclosure, but this cannot be changed by a homeowner."
We asked for clarification on this but none was forth coming.

These are the clauses from our bylaws that govern budget proposals and approvals:
Section 2. Budget. The Board of Directors shall prepare and submit, or cause to be prepared and submitted, to the Members at their annual meeting a proposed budget for the Association for the fiscal year. The proposed budget shall set forth with particularity the anticipated common expenses for the fiscal year and the amount of money needed to establish reasonable reserves for the payment of common expenses and contingencies.

Section 3. Approval of Budget. The proposed budget, as it may be amended upon motion by any Member, shall be submitted to a vote of the Members and when approved shall become the budget (Budget) of the Association for the fiscal year. The terms of the Budget shall be binding upon the Board of Directors unless and until such terms are amended by action of the Members.


Does their reasoning make sense? Can they disallow a line item amendment?
TimB4
(Virginia)

Posts:16045


11/29/2018 5:46 AM  
Yes, it makes sense.


The membership is approving or disapproving the budget on the whole.

Setting the amount of fees for common area use is the boards responsibility.
Hence, the vote made was an advisory vote vs. mandate.

This occurs with other Associations as well.

Our membership said to fire an independent contractor.
That vote at the meeting was not binding because the Board has the authority to enter into contracts without membership approval.


What appears to need to happen to have those fees changed would be to gather support and replace the board. This way, the new board can then set the fees.
AugustinD


Posts:1208


11/29/2018 7:14 AM  
I do not automatically trust legal arguments of HOA attorneys. This is because many HOA attoneys take the position that they are paid to put forth the Board's view and not the view of "The Law." This is even if the Board's view would not be the attorney's objective position. The HOA attorney in many cases plays the proverbial aggressive advocate for his or her client. (Which often amounts to more billable hours. An attorney stirring up conflict = more income for the attorney.) Said client is often simply a Board majority. But in this case, I think the HOA attorney's argument is probably correct.

As to whether the Board made a sound decision regarding these particular fees: Do residents on the spur of the moment have enough of a handle on the income needs of the HOA to make an informed voting decision on this point? If not, perhaps this is another reason the decision on this lies with the Board.
SueW6
(Michigan)

Posts:354


11/29/2018 12:56 PM  
Sounds like you wanted to change the fees collected for the storage area. That fee was part of an assessment.

The board can’t change assessments without a lengthly process involving membership vote, so the budget showing the expected revenue could not be adjusted.

Start working in the background to change that certain fee now so that the next year’s budget can show different figures.
BillD15
(South Carolina)

Posts:9


11/29/2018 3:00 PM  
Posted By SueW6 on 11/29/2018 12:56 PM
Sounds like you wanted to change the fees collected for the storage area. That fee was part of an assessment.

The board can’t change assessments without a lengthly process involving membership vote, so the budget showing the expected revenue could not be adjusted.

Start working in the background to change that certain fee now so that the next year’s budget can show different figures.


The change I was proposing actually increased their income by $25. The BOD proposed charging 3 different fees based on boat sizes in the storage yard. The wording was not clear and didn't mention campers or utility trailers. They said it is implied that the fees will be based on the manufacturers model identification numbers on the item. These numbers are not reflective of the true size of the items.

My proposal was to stay with the one fee structure that is in place this year. The property management company we use took until August to get the invoices correct for this year (we are invoiced for a January 1 due date). My argument was that they couldn't manage a simple one fee for all, they are not going to get the invoices correct for three different class of people with three different fees. I was trying to simplify their process.

I manage the storage yard and the BOD had mentioned it to me earlier in the year. I told them then that it was going to cause more issues than its worth. They had plenty of time to work it out especially seeing the issues with the invoices this year.
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