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Subject: Another budget/assessment adoption question
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JeffT
(Maryland)

Posts:83


12/06/2019 10:28 AM  
At the annual meeting, the BOD handed out a proposed budget to everyone. It was discussed a bit by all owners in attendance. The BOD president then took asked for a vote of all of the owners present whether to adopt or not. They vote was to adopt. My question is: Isn't this the duty of the BOD to vote and adopt the budget and assessment and not the quorum of the unit owners?

Also to note, voting of the budget was not in the meeting notice sent out to the unit owners.

By-Law:


(d) The Board shall determine the amount of the assessment
annually by preparation and adoption of an annual proposed budget
as provided in section 11—109.2 of the Act.
Budget shall be amended only In accordance with the Section of the Act aforesaid.

(e) The omlsslon of the Board, before the expiration of any
budget period, to adopt a budget hereunder for that or the next
period, shall not be deemed a waiver or modification in any
respect the provisions of this Article or the Act, or a
release of assessment installment thereof, for that or any
subsequent budget period, but the budget is fixed for the preceding
period shall continue until a new budge id fixed.
No Unit Owner may exempt himself from liability for assessments by a waiver
the use or enjoyment of any of the Common Elements or by
abandonment of any belonging to him. Expenditures
increasing the annual assessment In excess of fifteen percent (15%)
shall be levied as provided In the Act.
JeffT
(Maryland)

Posts:83


12/06/2019 10:33 AM  
Here is THE ACT:

Real Property
Title 11 - Maryland Condominium Act
§ 11-109.2. Annual proposed budget
Universal Citation: MD Real Prop Code § 11-109.2 (2017)
(a) Preparation and submission. -- The council of unit owners shall cause to be prepared and submitted to the unit owners an annual proposed budget at least 30 days before its adoption.
(b) Items required to be included. -- The annual budget shall provide for at least the following items:
(1) Income;
(2) Administration;
(3) Maintenance;
(4) Utilities;
(5) General expenses;
(6) Reserves; and
(7) Capital items.
(c) Adoption. -- The budget shall be adopted at an open meeting of the council of unit owners or any other body to which the council of unit owners delegates responsibilities for preparing and adopting the budget.
MarkW18


Posts:1289


12/06/2019 11:16 AM  
According to (c), it is done at a meeting of unit owners, not board members. There should a section in your CCR that addresses this more specifically.
JohnC46
(South Carolina)

Posts:9660


12/06/2019 11:36 AM  
Jeff

Few docs call for owners to vote on approving the budget. In our case the BOD makes the budget then informs owners what it is. The BOD does not need owner approval. Owners can call a Special Meeting and reject the budget. In our case it would require the majority of ALL OWNERS voting to reject.

My initial impression is your BOD President did not need to do what he did and he could have been asking for trouble had the owners rejected it.
SheliaH
(Indiana)

Posts:3343


12/06/2019 12:22 PM  
I'm with John. You should also see if the condo law applied to all of them or condos that came into being after a certain effective date. That may be at the beginning of the statute.

And you might read the rest of your Bylaws - there may be more specific language in there about the budget. In my community, homeowners don't vote on assessment increased unless they will exceed 5% over the current year's budget. If it's a special assessment, homeowners have to approve it, but of course, that isn't the same as the annual budget.

While you're still reading stuff, take a close look at the upcoming budget and ponder what was discussed at the meeting. You were there, so do you remember if there was mention of things like increased costs in maintaining the common areas? Are the reserves underfunded (most are) and the association has a major expense on the horizon, such as street repaving?

No one likes fee increases and although it's not necessarily a bad idea for homeowners to sign off on the budget, you and I both know most will vote them down every time because they just don't want to pay more, even if the increase is justified. They usually haven't taken a good look at the income/expense reports either, or the preceding board meeting minutes where the budget should have been discussed, nor will they attend regular meetings to hear the conversations themselves and ask questions during the resident forum.

After a few years of this, the association may wind up with a major expense they can't escape and have to pay more anyway, along with a special assessment because there wasn't enough money in the budget to fund reserves properly and pay for current expenses. This is often why the routine budget decisions are left to the board - if they're smart, they're keeping an eye on expenses and the homeowners informed so there's no question about transparency and homeowners can make an informed decision.
JeffT
(Maryland)

Posts:83


12/06/2019 12:36 PM  
Ye I was there and the talk is about higher than expected expense and low reserve funds. It had a 3% increase proposed.

But the question is if it is up to the board to adopt or the unit owners. The BOD did not adopt or it was not adopted or adopted properly, then the budget for the year before will still be in effect the way I read it.

The BOD has always done the adopting in prior years as far as I remember.

I just want to make sure that it is done properly
GeorgeS21
(Florida)

Posts:2890


12/06/2019 12:37 PM  
"or any other body to which the council of unit owners delegates responsibilities for preparing and adopting the budget"

I think this means the Board, in this case.
AugustinD


Posts:3647


12/06/2019 1:09 PM  
From the Maryland Condominium Act, https://sos.maryland.gov/Documents/CondominiumBooklet.pdf:
11-109(a) ... "The council of unit owners shall be comprised of all unit owners."

11-109(b) "Delegation of powers. — The bylaws may authorize or provide for the delegation of any power of the council of unit owners to a board of directors, officers, managing agent, or other person for the purpose of carrying out the responsibilities of the council of unit owners."

Jeff, by my reading of the Maryland Condominium Act and your condo's Bylaws, to do this properly I think your Board should have voted independent of the membership to adopt the budget, and the Board should have done so at a properly noticed Board meeting. I think a Board meeting could (and should) be held separate from a meeting of the membership. Else things get too confusing.

Alternatively the Board could have said, "We vote the way a majority of members present in person or by proxy votes. Please raise your hand if you support adoption of the budget." But this still conflates the board meeting with a meeting of the members. The latter is not good.

Either way I think the implication is the Board adopted the budget. I think a legal argument otherwise would annoy a judge.
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Forums > Homeowner Association > HOA Discussions > Another budget/assessment adoption question



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