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Subject: Owner approval of special assessments and annual budgets
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JohnS111
(New York)

Posts:73


05/05/2019 8:07 AM  
In my HOA, the board has full power to impose special assessments and to adopt annual budgets (which would include HOA dues).

Conversely, in another HOA where I have a property, approval of owners is required for special assessments, and if enough owners vote against annual budgets, they are rejected.

So I find it strange that in the first HOA, the board, but not owners, has the right to impose special assessments and adopt annual budgets. I find it even stranger because the board has not been elected based on votes of owners at an annual meeting in ages; vacant board seats are filled by the board's decision, and at annual owners' meetings, if there is ever a quorum, it's because the board has obtained proxies to constitute a quorum. So owners in practice have basically no approval, even indirect, over imposition of special assessments and over adoption of annual budgets.

First, in your HOA, do owners get to approve special assessments and annual budgets?

Second, if you lived in an HOA where owners don't have those approval rights, wouldn't you like to have those rights?

Thanks.
BobB31
(Florida)

Posts:74


05/05/2019 8:17 AM  
Our bylaws (written in the 70s) have the board being the sole approver of the annual budget along with the assessments required. Special assessments require board approval as well.
Sometime in the past couple decades, a board decided to ignore the bylaws and put budget approval to a membership vote in the annual membership meeting.

I have just been chosen to replace our board member who resigned and my major push for the rest of this term is to get our governing docs rewritten, so I will be following this topic with great interest.
MelissaP1
(Alabama)

Posts:8090


05/05/2019 8:20 AM  
Our owners approve special assessments. They don't do the annual budget. Special assessments aren't random. They are dedicated to one purpose only. Say we need a pool resurfaced. The special assessment is for the pool resurfacing project only. It's not for "Let's put all other budgetary items into a pot etc...".

A HOA is elected by it's general membership to represent and control the budget on the behalf of the entire HOA. Basically the board handles the day to day business the general membership doesn't have to. That day to day operations includes budget items.

Each HOA is run differently and not owned the same way. A Developer owned HOA the board is set up differently than an owner owned one. Most likely the Developer one, members aren't elected but appointed. They don't have be HOA member or own property in a HOA. They could work for the Developer's company. An owner owned HOA, the members are usually made up of ONLY owners and board member are elected.

It depends on what type of HOA I live in to decide how I want it to be run. But it's NOT what I want. It's what the developer or the other owners want. I go by the rules that are written. If I don't like them, then I run for a board position or gather votes from the membership to change them.

Former HOA President
JohnC46
(South Carolina)

Posts:8274


05/05/2019 9:20 AM  

As per our docs, the BOD can raise the yearly assessment (dues) by whatever amount it wants to raise it. There is a procedure they must follow but any increase is the BOD's decision alone. Owners do not get to approve the amount. There is a lengthy procedure where 51% or more of all owners (I repeat, all owners) at a Special Meeting, could turn an increase down. Fat chance of ever getting that amount of owners at a Special Meeting.

A Special Assessment would require 2/3rds of all owners (I repeat, all owners) approving of such.

When we have a BOD (5 members) vacancy (resignation, death, relocations, etc.), the BOD (with a BOD majority vote) can fill the vacancy. If one is appointed by the BOD, they fill out the remainder of term of who they are replacing. Our BOD terms are 2 years long. The BOD can also wait until the next Annual Meeting/Election and have the owners elect who fills the vacancy. Thus we have two ways of filling a BOD vacancy. As we have an MC, we can easily operate with a 3 person BOD and we have done such in the past.

I am satisfied with the way we operate. It takes 66% of all owners (I repeat, all owners) to change a Covenant and 51% of all owners (I repeat, all owners) to change a Bylaw. I believe those amounts are high enough to prevent a rogue faction from making changes.

You may ask yourself: Why does he keep repeating (I repeat, all owners)? The reason is many think it is only a % of those there, voting, etc. to change something when it requires a % of all owners (I repeat, all owners) agreeing.

As far as Proxies go, the latest dated Proxy is the one that counts and anyone can collect Proxies. The BOD could have a Proxy from Mary Smith dated 01/01 but if I show up with her (new, changed) Proxy dated 01/02, the one I hold prevails. Yes it would take some work on my part to "beat" the BOD, but it can be done.

GenoS
(Florida)

Posts:2907


05/05/2019 1:13 PM  
Posted By BobB31 on 05/05/2019 8:17 AM
I have just been chosen to replace our board member who resigned and my major push for the rest of this term is to get our governing docs rewritten, so I will be following this topic with great interest.

Have fun. If you hit upon a way to do that at a reasonable cost that doesn't take 2 or 3 years please let us know. And good luck!
SheliaH
(Indiana)

Posts:2473


05/05/2019 7:42 PM  
Our association's annual budget is approved by the board. If next year's assessment exceeds the current by 5% or more, then the homeowners have to approve the annual budget. Owners do approve special assessments - I think 75% or more is required.

This has worked well for our community, and I admit I'm probably biased because I served for 10 years, 5 as treasurer and we worked hard to keep homeowners informed about the budget. For us and most responsible HOA boards, that's what's supposed to happen - effective HOA management requires transparency, and I, for one, would have a problem with a HOA board not having some sort of check against an assessment increase just because it's Tuesday and they can. Setting a budget decision is what HOA boards do, along with keeping homeowners informed. Unfortunately, apathy is a huge problem with HOAs and most people only think of an assessment's effect on their own household budget. If the homeowners were able to approve the budget, it would probably get shot down if the assessment increased by even a quarter because it's "too high." I don't like paying more either, but I also know that today's dollars may not be enough two or five or 10 years from now (inflation and all that). Instead, people think they'll be long gone by the time the caca hits the fan.

That's often why special assessments come into play - they should be rare, but too often, they become necessary because previous boards didn't fund the association properly, like establish and maintain a reserve fund, and were more interested in getting elected and re-elected. If you don't have enough money in the annual budget or reserves, but you have no choice but to do the work because it's been put off far too long, the current board (and possibly new homeowners who didn't have anything to do with the bad decision making of the past) have to deal with the fallout.

Now as far as vacancies and proxies go, I find it odd that your association hasn't had an elected board in "ages." You don't say how big your community is, but simple math would dictate if you have a community of, say, 100, with a 7 person board, the remaining 93 should be more than enough to vote out the current bunch and put in folks who will act in a responsible manner. In our community, the board fills vacancies, but that spot comes up for election in the next annual meeting, so someone else could run for that spot. Election campaigns usually include talking to the other homeowners about attending the meeting to cast a vote or at least collecting their proxy so you can cast it on their behalf. Your board is doing it, but that shouldn't stop someone else from doing the same thing to vote them out. You might want to check your documents to see how proxies are supposed to be used - if they're not being used properly, all of the homeowners need to show up to actually cast the vote themselves. Such is politics, whether you're on a school board or a HOA board.

Finally, HOA 1 doesn't have to be run like HOA 2. Any HOA is as good or bad as the homeowners in it - I believe someone else made that point on another conversation on this board, and it's true. If the same people have been on your board for years and years, maybe it's because they're actually good at what they do - or not enough people have called them on their BS. If you want a change, it's time for you to go out and start talking to your neighbors.
AugustinD


Posts:1594


05/05/2019 8:25 PM  
Posted By JohnS111 on 05/05/2019 8:07 AM
So I find it strange that in the first HOA, the board, but not owners, has the right to impose special assessments and adopt annual budgets. I find it even stranger because the board has not been elected based on votes of owners at an annual meeting in ages; vacant board seats are filled by the board's decision, and at annual owners' meetings, if there is ever a quorum, it's because the board has obtained proxies to constitute a quorum. So owners in practice have basically no approval, even indirect, over imposition of special assessments and over adoption of annual budgets.


I disagree with your conclusion. If there is typically no quorum, then it is because owners are choosing not to vote. These non-voters are saying they do not care to have a say in electing directors who would impose, or not impose, special assessments. That the same people and their cronies remain the directors year after year is a logical and likely legal outcome.
JohnS111
(New York)

Posts:73


05/06/2019 2:31 AM  
AugustinD, thanks. The meeting materials that the property manager circulated don’t have any information about the meeting or the board on them, other than the annual meeting’s time/place/location (a conference room that fits about 10 people, miles away and inconvenient for people to go to). The meeting materials and proxies don’t even list the board members’ or candidates’ names. The proxy just says that it appoints the board president to do whatever the board president wants. There is very little transparency.

Do owners could go out of their way to a meeting far away and find out what’s going on, but the system is designed to reduce owner involvement and transparency. It’s like a North Korea election: perhaps in theory it could be a true democratic one, but in practice it isn’t.
MelissaP1
(Alabama)

Posts:8090


05/06/2019 4:19 AM  
It sounds like the HOA is not under owner control. Which if it isn't then a meeting place could be where the owner or management company is. They are having a meetings. Whether it's convenient to get to isn't the HOA's problem. It's being offered and not spoonfed.

Former HOA President
JohnS111
(New York)

Posts:73


05/06/2019 5:08 AM  
Standard disclaimer: I check the authors' names on posts, on the left-hand side of the screen, before reading them. I ignore everything that MelissaP1 says.

I'll let everyone know how this item works out--if other owners care. They might not.
BarbaraT1
(Texas)

Posts:160


05/06/2019 6:38 AM  
I've seen many governing documents that give owners the opportunity to reject a budget (within a time frame and with a required percentage) but never one that required owners to approve a budget. I can't imagine how that would work. Most homeowners, in my experience, tend to be cheap, lazy, and uninterested in learning about the HOA or its operation.
JohnS111
(New York)

Posts:73


05/06/2019 6:41 AM  
BarbaraT1, good point. Thanks.
AugustinD


Posts:1594


05/06/2019 7:02 AM  
Posted By JohnS111 on 05/06/2019 2:31 AM
AugustinD, thanks. The meeting materials that the property manager circulated don’t have any information about the meeting or the board on them, other than the annual meeting’s time/place/location (a conference room that fits about 10 people, miles away and inconvenient for people to go to). The meeting materials and proxies don’t even list the board members’ or candidates’ names. The proxy just says that it appoints the board president to do whatever the board president wants. There is very little transparency.


If the bylaws or covenants on how elections are to be run are being violated, then this is what you need to pursue via first a few polite letters citing the bylaws/covenants being violated, then a demand letter citing same, then if needed going to court.
FredS7
(Arizona)

Posts:900


05/06/2019 11:45 AM  
Posted By JohnS111 on 05/05/2019 8:07 AM
In my HOA, the board has full power to impose special assessments and to adopt annual budgets (which would include HOA dues).

Conversely, in another HOA where I have a property, approval of owners is required for special assessments, and if enough owners vote against annual budgets, they are rejected.

So I find it strange that in the first HOA, the board, but not owners, has the right to impose special assessments and adopt annual budgets. I find it even stranger because the board has not been elected based on votes of owners at an annual meeting in ages; vacant board seats are filled by the board's decision, and at annual owners' meetings, if there is ever a quorum, it's because the board has obtained proxies to constitute a quorum. So owners in practice have basically no approval, even indirect, over imposition of special assessments and over adoption of annual budgets.

First, in your HOA, do owners get to approve special assessments and annual budgets?

Second, if you lived in an HOA where owners don't have those approval rights, wouldn't you like to have those rights?

Thanks.




It's not strange, it's different.

Homeowners exercise their rights through election of the board.

The board HAS a quorum if they have enough proxies. The board appoints members to fill vacant seats if there is no interest in running for the board.

This means homeowners as a whole feel that everything is fine, or at least fine enough.

Like in the US as a whole, you are not REQUIRED to exercise your right to participate in the process.
TimM11


Posts:253


05/06/2019 12:41 PM  
To answer the OP's original questions:

1) Homeowners don't approve annual budgets in my HOA. I'm not sure about special assessments; I'd have to look at the docs. It hasn't come up in the time I've lived in mine as we've been good enough about budgeting and planning to avoid them.

2) I'm fine with the Board having authority to approve the budget and levy special assessments. If homeowners are unhappy with what happens, that's what elections are for. IME, requiring homeowner approval on these things would mean they would never happen, not due to opposition so much as apathy.

Finally, I agree with the others who said that HOAs are always going to vary in how they do things, and that is fine as long as they are following their own CC&Rs and whatever laws may apply.
GenoS
(Florida)

Posts:2907


05/06/2019 2:56 PM  
In my HOA budgets are enacted by the Board of Directors at its sole discretion. The same for any special assessments.

As an owner I don't want the ability to interfere in the budget process. Actually I wouldn't mind, myself, but I wouldn't want my wacky neighbors to have a say. Most of them haven't the first idea of what it takes to run the place. If the homeowners here had a say like that then there would be no reserves whatsoever. For years the board has kicked the maintenance ball down the road with "we'll do that when we have the money" excuse. That's bad enough. With the homeowners' fingers in the budget pie the place would self-destruct due to neglected maintenance.
JohnS111
(New York)

Posts:73


05/07/2019 5:02 AM  
Thanks very much for the responses. It looks like my view of this--why shouldn't owners have a right to approve special assessments and annual budgets--isn't widely shared, and people are often fine with delegating this right to boards.

I'll hold off on doing anything in my HOA about this, as I don't want to stir things up particularly if my views aren't shared by a majority of owners.

Thanks again.
KellyM3
(North Carolina)

Posts:1367


05/07/2019 1:01 PM  
My community has multiple HOA boards and they operate under both budgetary approval provisions.

The Condo HOA can approve budgets and special assessments without direct input from owners. This works because the condos have a high level of shared building maintenance and more pressing emergencies.

Our Master Association covers the pool, clubhouse and grass park. Master association emergencies, while bad or inconvenient, aren't affecting a person's immediate housing. The master association approves budgets, but dues increases can only track the U.S. Inflation Rate and 100% of special assessments require owner approval (any assessment that requires the use of common property elements as loan collateral). The master association provides the "fun" amenities and needs a nice, tight financial leash.

After seeing both policies in action, I agree w/ both them given the board operations and expectations.
JohnC46
(South Carolina)

Posts:8274


05/07/2019 1:47 PM  
Posted By BarbaraT1 on 05/06/2019 6:38 AM
I've seen many governing documents that give owners the opportunity to reject a budget (within a time frame and with a required percentage) but never one that required owners to approve a budget. I can't imagine how that would work. Most homeowners, in my experience, tend to be cheap, lazy, and uninterested in learning about the HOA or its operation.




This is how our association dues increases work. The BOD must submit the upcoming budget (effective 01/01) on or before 12/01. The dues increase can be any (I repeat any) amount the BOD decides. The owners have 30 days in which to call a Special Meeting and 51% of all owners (I repeat all owners) would have to vote NOT to accept the 01/01 Budget. Our owners do not get to approve the budget but they could disapprove it. If they disapprove the Budget, there is a automatic 5% dues increase.

We have never had a dues increase (10 years) until this year when we increased dues by 40%. From $50 to $70 a month. We had one out of 112 owners go on a tear about it. His criticism died out fast.
NpS
(Pennsylvania)

Posts:3247


05/07/2019 6:10 PM  
Posted By JohnC46 on 05/07/2019 1:47 PM
This is how our association dues increases work. The BOD must submit the upcoming budget (effective 01/01) on or before 12/01. The dues increase can be any (I repeat any) amount the BOD decides. The owners have 30 days in which to call a Special Meeting and 51% of all owners (I repeat all owners) would have to vote NOT to accept the 01/01 Budget.



You have just described a typical ratification process. If 51% of owners don't disapprove, then the budget is ratified. Percentages may vary. More often the ratification process occurs at an annual meeting rather than a special meeting.

In the 30 years I've lived in my HOA, budgets have always been ratified. Many homeowners think that their votes count toward something - but in reality, the vote of the Board to approve the budget winds up being the only vote that actually count.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnC46
(South Carolina)

Posts:8274


05/08/2019 3:38 AM  
Posted By NpS on 05/07/2019 6:10 PM
Posted By JohnC46 on 05/07/2019 1:47 PM
This is how our association dues increases work. The BOD must submit the upcoming budget (effective 01/01) on or before 12/01. The dues increase can be any (I repeat any) amount the BOD decides. The owners have 30 days in which to call a Special Meeting and 51% of all owners (I repeat all owners) would have to vote NOT to accept the 01/01 Budget.



You have just described a typical ratification process. If 51% of owners don't disapprove, then the budget is ratified. Percentages may vary. More often the ratification process occurs at an annual meeting rather than a special meeting.

In the 30 years I've lived in my HOA, budgets have always been ratified. Many homeowners think that their votes count toward something - but in reality, the vote of the Board to approve the budget winds up being the only vote that actually count.




We use to present the new budget at our Annual Meeting in April when in reality we had been operating under it since 01/01. As it never contained a dues increase, no one really cared how nor when we did it.

As this was going to be our first dues, we needed to be sure to do it properly. Present it on or before 12/01 (US Mail to each owner) and it becomes effective 01/01 unless 51% of all owners, at a Special Meeting, disapprove it.

We wanted be sure we crossed all the T's and dotted all the I's thus we followed our docs to the letter. We also included a cover letter and financial information showing why we needed to do such.

We had only one owner challenge us and he faded fast.
JohnS111
(New York)

Posts:73


05/08/2019 4:58 AM  
Thanks again. I'm guessing that the procedure in JohnC46's posts is required by law.

I'm stepping back from proposing changes in my own HOA.

For the record, my real name is NOT John.
NpS
(Pennsylvania)

Posts:3247


05/08/2019 6:03 AM  
Posted By JohnC46 on 05/08/2019 3:38 AM
As this was going to be our first dues, we needed to be sure to do it properly. Present it on or before 12/01 (US Mail to each owner) and it becomes effective 01/01 unless 51% of all owners, at a Special Meeting, disapprove it.



We get email signoff from 80% of our owners that they are willing to accept notices via email. Everyone else gets copies delivered to their door. (Gives one of our community walkers something to do for the HOA.) We save thousands of dollars that used to be wasted on postage.



Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnC46
(South Carolina)

Posts:8274


05/08/2019 7:45 AM  
Posted By JohnS111 on 05/08/2019 4:58 AM
Thanks again. I'm guessing that the procedure in JohnC46's posts is required by law.

I'm stepping back from proposing changes in my own HOA.

For the record, my real name is NOT John.




The proper procedure is in our Covenants so that is what we followed.

For the record, my real name is John.....LOL
RoyalP
(South Carolina)

Posts:737


05/08/2019 8:26 AM  
'my' hoa:


assessments may be increased annually 15% or less by BOD


over 15% requires a member vote


ps. MY real name is also John, albeit different last than JohnC
SheliaH
(Indiana)

Posts:2473


05/08/2019 8:52 AM  
Posted By JohnS111 on 05/08/2019 4:58 AM
Thanks again. I'm guessing that the procedure in JohnC46's posts is required by law.

I'm stepping back from proposing changes in my own HOA.

For the record, my real name is NOT John.




Everyone's anonymous to a certain degree so who cares if your name's John, James or Tyrone???

If the process really concerns you, that shouldn’t stop you from asking questions or even proposing alternatives. AugustineD is right when he said some boards continue to do whatever they want because no one has the guts and/or takes the time to challenge them. You also said you didn’t want to stir things up, especially if most of your neighbors might disagree with you – how do you know they won’t. Maybe you should try to talk to some of them – you may find some agree with you there should be more transparency and perhaps some new blood on the board itself. That’s how change begins – won’t happen overnight and it won’t be easy, but a lot of us on this board started the change in their community because they wondered some of the same things you did. By the way, change can also include your documents, although changing them could take a little more drama, especially if you have a ton of apathy.

Remember what Frederick Douglas said about power - Power concedes nothing without demand – it never has and it never will. So the next move is yours. At the very least, talking to your neighbors may lead to everyone attending the next board meeting – if all of you have to cram inside that conference room, so be it, or send one or two representatives to report back. Working together might prompt your board to be more forthcoming in explaining budget decisions. Regardless of who approves it, you have a right to know careful thought is being applied and people aren’t pulling numbers out of their behind – you won’t know for certain until you stop guessing.
RoyalP
(South Carolina)

Posts:737


05/08/2019 10:16 AM  
? what if:

"after careful thought is applied the BOD pulls numbers out of their behind" ?


as in the typical self managed 55+ community





(such as my own)
RichardP13
(California)

Posts:3534


05/08/2019 10:35 AM  
I can count on one hand all the budgets given to Board over 10 years that actually did ANYTHING with them.

Been there, Done that
NpS
(Pennsylvania)

Posts:3247


05/08/2019 11:31 AM  
Posted By RichardP13 on 05/08/2019 10:35 AM
I can count on one hand all the budgets given to Board over 10 years that actually did ANYTHING with them.



Sad

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
RoyalP
(South Carolina)

Posts:737


05/08/2019 11:57 AM  
but typical



JohnC46
(South Carolina)

Posts:8274


05/08/2019 2:31 PM  
The only thing our owners cared about was any dues increase. As we had never had a dues increase (until 2019), they basically paid zero attention to any budget numbers we presented. We could have added a few zero's and I doubt any would have noticed as long as the dues stayed the same.
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