JoanL
(California)
Posts:12
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| 11/30/2007 12:28 PM |
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| Our budget includes a doubling of cost for security because of the increase in hours of guards, which was never discussed with homeowners. In addition, the new budget was sent 30 days before the fiscal year was to begin even though the Rules state that it should be sent no less than 60 days before. Because this has resulted in a substantial increase in HOA dues, we're wondering if we can contest the entire budget. Our complex has 180 units in California. |
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SusanW1
(Michigan)
Posts:5202
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| 11/30/2007 12:32 PM |
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Your Association's budget should have a REVENUE and a EXPENSE column. Apparently, the Board put in the exspnse of the security system BEFORE they figured out how to pay for it!!
The dues increase should have been presented to the membership for approval IF that is how it is stated in the bylaws or other governing documents.
When the dues increase was approved, only THEN should they have hired more security.
Check it out. Something doesn't seem right here . . .
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RobertR1
(South Carolina)
Posts:5164
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| 11/30/2007 2:08 PM |
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JoanL,
If at the annual meeting this bidget has not been approved and I would believe that is one of the purposes of the annual meeting. When you say our budget, do you mean the proposed buget. If the Board is saying here is the budget we approved and you all have to live with it, and your documents don't specify the budget has to be approved by the members, I would call a "point of order" at the start of the meeting and question the board approving the budget without members approval and also question the board not abiding by the documents.
You will not to be able to be effective unless you have some support there, especially to second any thing you put in a motion, such as rejecting the budget as written and approved.
Californis is different in many wayss but I don't knoww California rules.
I also can not approve or understand how this budget can be approved without members vote. That an elections are the main reason for an Annual meeting. Something goofy somewhere.
Members can contest anything the Board does and if you have enough votes the board can not act. Seldom happens, but members are more like to racall the Board or any member on it. See documents. Also, look at Community Associatioms Newwork ad, just to the left of this postings.
Also research "Budgets" on search feature on Discussion Topic page, top right. |
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GloriaM
(North Carolina)
Posts:829
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| 12/01/2007 9:27 AM |
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Joan:
Does your governing documents or your state law require a ratification of the budget amongst the membership? |
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PatrickH
(California)
Posts:204
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| 12/01/2007 9:41 AM |
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Hi Joan,
Are there regulations in your HOA's controlling documents, CC&Rs etc, which limit the percentage that the Board can raise the annual budget and dues without a vote of approval from the membership? For example, in my HOA the maximum increase without a vote of approvals is 10% each year.
If you have this restriction and the budget increase exceeds it, then the Board acted improperly by approving it without a vote of the members. If you don't have that restriction, or the increase didn't exceed that percentage, or your controlling documents don't require a vote of approval by the members, then the Board acted withing ther guidelines.
Do you know if the memebers have voted every year in the past to approve the new budget? That should give you some insight as to whether a vote is required.
Regarding the 60 day notice, it is a rule that sometimes can't be adhered to. My HOA has that 60 day notice and I was the Treasurer for six years, so I personally know how tough it can be to get everything done and out the door 60 days in advance.
You can certainly question the fact that the budget wasn't sent on time, but what are you really trying to do? Is your goal to cut back on the amount of money spent on the guards? That can be done by renegotiating the security contract without blowing the entire budget out of the water and starting all over.
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RobertR1
(South Carolina)
Posts:5164
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| 12/01/2007 1:53 PM |
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Patrick and Joan
A raise can be done without members approval, if it is in the documents and a ceiling is observed, this is for fees increase only. But, that don't mean the budget is approved. The intent of all annual meetings is to approve a budget.
Also to have an election. If it doesn't state this in your documents, I would call for a vote at the annual meeting to have it done. If the Board still insists on not allowing the owners to vote on the proposed budget, then I would make every effort to toss them out. In fact, what is proper to do is for the Board to submit a proposed budget and when it is approved it becomes The Budget.
Look up a Proposed Agenda for an Annual Meeting. |
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JoanL
(California)
Posts:12
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| 12/02/2007 7:53 AM |
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Well the board is within the guidelines of 10% and they don't need the approval for the budget, the only thing they didn't adhere to is the time to submit it to the homeowners. The problem is that they have doubled the cost of security and increased our dues way over what other complexes are charging, plus the membership has other priorities the board is ignoring. One of the influential board members is a former cop and his main concern is security.
Thanks for your input.
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PatrickH
(California)
Posts:204
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| 12/02/2007 8:58 AM |
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Hi Joan,
Not to be looking for skeletons in the closets, but is there any chance that the former police office on your Board is somehow connected to this security company that just got a big increase in their contract? If so, then there certainly is a conflict of interest there. |
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RobertR1
(South Carolina)
Posts:5164
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| 12/02/2007 10:01 AM |
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Joan,
I hope a lot of people are reading this thread. Maybe we can get an answer to how many HOA's do not submit the budget for approval at the annual meeting.
Seems to work in California, so maybe I am offbase about approving the budget annually. I am not saying that the budget as listed is wrong, I don't know, and it appears your board can do 10% a year. What if the budget exceeds that due to special needs. Then I suppose the Board goes to the members. Who said 10% was correct for each year. We have what is called a Contingency fund in our budget. Each year it is always $99+.00
never over tenK. I have fought this for years. The reason are obvious, the amount is some ones idea of what they don't want to put into the contingency fund. Each year, fill it up as long as it don't exceed 10K.
That is not how you handle someone else's money, and neither is a built in 10%. It is just a bad practice. All Boards in HOA's have all the power in their documents to act independently if they see the need is there. They of course, won't use that power because they have to justify it to the people, so they pass some amendum to set a built in increase they don't have to justify. I don't know if any board is quilty or not, but I would have strong feeling if I was paying my 4K a year for dues and telling the Board you can do what you want with 10% of it.
It is not their money, is is not your money, it belongs to the association
for care of the real property. |
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JoanL
(California)
Posts:12
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| 12/02/2007 11:41 AM |
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No, he is honest, but his main interest is in security and is somewhat paranoid.
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PaulM
(Pennsylvania)
Posts:1347
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| 12/02/2007 3:03 PM |
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JoanL: I don't think it would be out of line for you and/or other members to raise the question of WHY? the cost for security is being doubled due to increased guards on duty. You can raise a Question from the Floor and offer a Motion for discussion of this issue (have someone else second the motion to allow the discussion to begin). If they can prove there is a need due to vandalism, break-ins, or that reports have been filed with the local police, then there may be a substantial need which would answer your concerns over the increase. It would be well to bring it up at the meeting since the discussion and the Board's 'justification for the increase' should be written/accepted as part of the minutes.
If they can't sufficiently prove the need for increased security, then I would seriously question them and their manner of increasing the budget without adequate justification. I don't think the matter of 30 days instead of 60 days in which you received the 'proposed budget' is an issue. You have a greater issue here to deal with.
Usually, a budget is a 'proposed budget' until it is voted upon by the membership and passed/approved by members according to the official documents--association and state.
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RobertR1
(South Carolina)
Posts:5164
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| 12/02/2007 3:54 PM |
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Paul and JoanL,
Your post is ALL right Paul and covers a lot of ground.
I also agree they have the right to question why they increased the budget. More important may be the question of why the members weren't included in the decision. Some boards seem to do things unilaterally then react defensively if they have provoked a question. Then their stance become either we had the right to do it or why are you questioning what we did, and never address the question of why they didn't bring it up before the association. And that is what I think Joan is going to run into when she asks the question at the Board meeting. The first question to get resolved is why didn't the Board consider the members. And of course, that may be where the main prolem is. If you can get a committment from the Board, and they shouldn't hesitate to admit they screwed up, which they did, you can work on a resolution. That is what I think Joan has to do. Do not let them cloud the issue. Since they have control of the meeting this can become very difficult. |
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JoanL
(California)
Posts:12
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| 12/02/2007 4:22 PM |
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Thanks for your support. Our open meeting is this Thursday, Nov 6th so I'll let you know what happens. I have posted an argument against the increase and will get as many people as possible to come to the meeting.
thanks again to you and Paul,
Joan |
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SusanW1
(Michigan)
Posts:5202
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| 12/02/2007 4:29 PM |
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Joan - is the increase GOING to be voted on or is it in effect NOW?
If there is a PROPOSED motion, then there will be debate after the motion is given. At that time you should get up and state your feelings and encourage a NO vote on the motion.
If the dues have ALREADY been raised then you need to ask the Board HOW and WHY that happened, since a vote of the membership is required to increase dues. (IF that is how we are reading your posts correctly - that increases require a vote of the Membership)
Good luck and keep us posted!!!
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RobertR1
(South Carolina)
Posts:5164
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| 12/02/2007 5:32 PM |
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| This sounds like a job for SuperHoaer. Where did she go anyway? Never around when we need her. Donna has said she may have to go out there and knock some heads together. We better find SuperHoaer fast, Someone ask Roger if she is up there on the slopes. |
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DonnaS
(Tennessee)
Posts:5671
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| 12/03/2007 11:01 AM |
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Donna Here!!!
Joan,
I have read this thing several times and I would think that the only item that your membership can hold against Board is that they did not get the proposed budget to the owners in adequet time. It was 30 days rather than 60 days, correct? They are within your limits of increase--10% They(the Board) does not need membership approval to increase dues as long as it is within the 10% limit. Yes, you and the members can get your point across to the BOD that they did not follow the 60 day requirement.
The problem is that have they already signed the contract with the security company for the increased service? If they have, you might have to just bite the bullet and pay because to get out of a signed contract would be another expense which you don't want to pay. If it is NOT signed, then you can give them an ear full and express you displeaasure with the increase.
What to do about the illegal notice of the budget increase? I would certainly put the entire Board on notice that they pulled a no-no on you the membership and that they will be responsible to the membership for correcting their procedures. (you can't cry over spilled milk.) |
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PaulM
(Pennsylvania)
Posts:1347
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| 12/03/2007 11:31 AM |
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JoanL: The fact that you state..."Well the board is within the guidelines of 10% and they don't need the approval for the budget,...", ALLOWS the Board to do what they did, but it does not necessarily make what they did RIGHT or for it to be determined a RESPONSIBLE ACT (the increase in funds for security) for your community.
To increase an expense because they CAN without member vote does not excuse their fudiciary duty and responsibility to act wisely when spending
assn. funds. Therefore, you and others are still within YOUR RIGHT to question the Board's reasoning and justification for the increase. Please keep us updated.
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RobertR1
(South Carolina)
Posts:5164
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| 12/03/2007 12:19 PM |
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Paul and all,
Paul is right from where I sit.I totally agree, maybe.
Also, comment on this Paul. Our documents say the Board is authorized to approve an increase in yearly assessments up to CPI for our region.
Our Annual meeting is in April, they set and start assessments on January first, no mention of this in documents.
Our Master deed says the budget and all assessments will be discussed at the annual meeting.
The Board says they caan do it.
I say they can't, I say they have to present their approved rate at annual meeting for discussion. After discussion and at end of meeting the members can either approve or disapprove the Budget. If approved the raise can take place. If the documents stated a fiscal budget year or exempted the CPI raise that the board CAN authorize and exempted the requirement on approval of the Budget at annual meeting, they can't do it. |
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