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Subject: Can We Change Our HOA Budget After It Is Already Approved?
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AsilB
(Illinois)

Posts:5


10/13/2020 12:16 PM  
We are in Illinois.

Our board is planning to spend a lot of money on a project that most residents do not want at this time.

We have elections coming up soon with several people running for a few spots on the board. It is almost 100% certain new people will be elected to the board because the current members are unpopular due to bad decisions and mismanagement. Our current board's plan is to pass the annual budget for next year to include this project BEFORE they announce the election results. They believe if they do this, we will have to do the project because it is in the budget. They seem to believe the budget cannot be changed once approved.

If new people are elected, are we able to change the budget and stop this project by redistributing the funds they are planning to use for it to other things (like reserves savings)? Or is a yearly budget essentially set in stone once it is approved?
KerryL1
(California)

Posts:7579


10/13/2020 12:47 PM  
A new Board may overturn a previous Board's decision whether re: a budget or something else.

A director would make a motion to rescind the Board decision previously made on dd/mm/2020. The Board would (apparently) vote to rescind the budget. Then a director would make a motion about the new budget. Or, if you have time before the budget is due, decisions about the budget could wait for a subsequent board meeting, regular or special. There, of course, need to be board members who can craft a budget.

The thing is, if the current Board enters into a contract for part or all of this project before the election, it's a different story.

When is your election?
JohnC46
(South Carolina)

Posts:10014


10/13/2020 1:13 PM  
Posted By KerryL1 on 10/13/2020 12:47 PM
A new Board may overturn a previous Board's decision whether re: a budget or something else.

A director would make a motion to rescind the Board decision previously made on dd/mm/2020. The Board would (apparently) vote to rescind the budget. Then a director would make a motion about the new budget. Or, if you have time before the budget is due, decisions about the budget could wait for a subsequent board meeting, regular or special. There, of course, need to be board members who can craft a budget.

The thing is, if the current Board enters into a contract for part or all of this project before the election, it's a different story.

When is your election?



I agree. Easy enough to do as Kerry says.
ChrisE8
(New York)

Posts:128


10/13/2020 1:42 PM  
The advice above is correct.

If you're concerned about the board signing a contract, maybe there would be a way of informing the counterparty that the contract will be canceled asap if the board is replaced in the upcoming election, which would make the counterparty think twice before proceeding. But that's getting on thin ice, legally.
DouglasK1
(Florida)

Posts:1538


10/13/2020 2:47 PM  
Note that a budget is a spending plan, not an obligation to implement specific projects. Even if the money is budgeted, there is no requirement that the board needs to spend that money.

Escaped former treasurer and director of a self managed association.
GenoS
(Florida)

Posts:4130


10/13/2020 3:27 PM  
A board can change a budget as discussed above. The thing that would concern me is the added complexity of accounting where "year to date" vs budgeted amounts, as reported monthly, can get really messy if the budget line items change mid-year. So sure, it can be done. I question how "easy" it would be.
AugustinD


Posts:4152


10/13/2020 3:40 PM  
Posted By AsilB on 10/13/2020 12:16 PM
We are in Illinois.
Condominium or Non-Condominium? Was your Declaration recorded on or after August 10, 1990? The Illinois Condo Act appears to have some very specific requirements re budgeting.
AugustinD


Posts:4152


10/13/2020 3:49 PM  
AsilB, also what, if anything, do your Declaration and Bylaws say about Reserve Requirements? Again, the Illinois Condo Act has some interesting requirements on this subject as well. Per the statute, the Reserve Requirements interplay with Budgeting requirements.
AsilB
(Illinois)

Posts:5


10/14/2020 12:21 PM  
Thank you all for the replies. Luckily they won't be signing the contract before the election so we are in the clear.

Can someone point me to the part of the IL condo law that talks about reserve requirements? I can't seem to find it and it isn't in our bylaws.

AsilB
(Illinois)

Posts:5


10/14/2020 12:21 PM  
I'm not sure if we are condominium or non condominium. It was recorded before 1990.
AsilB
(Illinois)

Posts:5


10/14/2020 12:43 PM  
Essentially what has happened is our association did not properly budget for new siding on our buildings. Siding is an exterior element and is supposed to be 100% covered by our dues. But they never set aside any money for it.

Our board of 5 people is very obsessed about re-doing the siding, which will cost over $1 million. We've had two old ladies fall because of issues with sidewalks. But they don't want to spend money to make sidewalk repairs. They care only about the siding.

At a meeting about it several months ago, the board president excitedly talked about our the color of our buildings being "on trend" for 2021. She is very obsessed with having better colors and other cosmetic features. At that time they wanted everyone to pay $12,000 to have the siding redone and the homeowners through an absolute fit and delayed the project. The majority of homeowners here are working class/lower middle class folks. $12,000 is a great deal of money for most of us, especially now that some have lost their jobs due to COVID.

The board members are the financial "elite" of the neighborhood. The majority are retirees who moved here to downsize and have healthy pensions and savings. The board president is a single woman with no kids with a good career and drives a lexus, wears designer clothes, and brags about how paying $12,000 will be "no problem" for her. They all complain about how the siding looks too old and it doesn't look "nice." They have said things like "if people can't pay, I guess it is time for them to sell their homes and move" and "if they can't pay and won't sell, we'll just put a lien on their home."

We had only about $150,000 in our reserves when they first proposed this project so there was no chance of the association covering it. So they raised dues like crazy and cut services and they were able to raise our reserves to $400,000. Now she wants to drain the reserves down by 75% and then have us all pay a slightly smaller special assessment.

She refuses to consider doing a few buildings at a time. They all MUST be done NOW.

Our siding is old and will need to be replaced soon. The project is not completely cosmetic. We had one or two buildings with leaks because of bad siding. However, the majority of buildings are doing ok. They do look old and tired, but that's also because they have never been power washed (which the board refuses to do).

I and other members of the community want to wait a few more years until we can build reserves and hopefully have the association pay the majority of the cost. They are raising dues by another 15% again this year after 15% increases for the last three years. Some people will be forced out of their homes because they can't pay the dues. Our dues are already the highest in our area. We have no clubhouse, pool, etc. We barely get anything for this high price. The board plans on pushing the project through "no matter what" for next spring.

2 board members are up for re-election and I'm running along with my neighbor to try to force them out and put a stop to this. Wish us luck!

I wish I could time travel to 3 years ago when I bought this place and buy a single family home instead. What a mess.
JohnC46
(South Carolina)

Posts:10014


10/14/2020 1:26 PM  
ASIL

My HOA (standalone, private, patio homes) was in a similar position. Our Covenants call for the HOA to replace roofs (20 or so year life) and siding (30 or so year life) and while we were putting some money aside in the Reserves, it became obvious we would not have enough. As a result we implemented a 40% dues increase ($50 to $70 per month) to cover this.

I am not saying your siding does or does not need replacement but it is not uncommon for people to object to any increase and we are only hearing one side of this argument.
GeorgeS21
(Florida)

Posts:3275


10/14/2020 2:25 PM  
Asil,

These are always tough to judge from a distance - however, the Board is likely moving ahead as they, the Board, see fit to do so.

Now, if the constituents of the Board - the membership - don't like what they are doing, then the membership can recall the board - or, as you suggest vote others in.

However, I must tell you, as I think John was artfully trying to do - that many COAs decline because people that live there age, and become incensed when the assessments increase - it is just an artifact of living in these communities. And, at some point, the area is now "closer in" or "becoming the hot spot" so younger, more economically advantaged families move in and want the community to reflect their standards - sometimes who communities change out over 10 years.

Finding common ground is key - perhaps form a committee to review a balanced path forward?

If the new folks are not interested in a balanced path, and continue to have the political support to increase assessments to improve the community, it is probably what it is.
JohnC46
(South Carolina)

Posts:10014


10/15/2020 1:08 PM  
A story. One HOA I was in (175 townhomes valued at about $450K each) had a serious problem. Ice dams were common and the HOA would replace underlayment/siding as needed. Well there came a time that type siding was no longer manufactured. Additionally garage doors were rotting and entry stairs (brick and mortar) were crumbling. The BOD spent about a year getting estimates, contractors lined up, etc. to replace all. It came in at about $25K per home. The BOD worked with a local back to arrange a payment plan. There were many meetings, discussions, etc regarding the project and the finance. The finance would be a debt for each unit with the bank. Payable all at once with no interest and plans extending over 5 years.

Well such an assessment had to be approved by 75% of all members. The BOD did such a good job of presenting everything that 90% voted yes. Well that did not stop some unhappy with the projects from suing. Several banded together and sued. The suit was dismissed as the judge ruled the HOA had followed all proper procedure. Then two other owners tried another suit. It was promptly dismissed with prejudice.

Bottom line is not all will agree with anything no badly how much it is needed if it is going to cost them money.
AsilB
(Illinois)

Posts:5


10/15/2020 1:28 PM  
Posted By JohnC46 on 10/14/2020 1:26 PM
ASIL

My HOA (standalone, private, patio homes) was in a similar position. Our Covenants call for the HOA to replace roofs (20 or so year life) and siding (30 or so year life) and while we were putting some money aside in the Reserves, it became obvious we would not have enough. As a result we implemented a 40% dues increase ($50 to $70 per month) to cover this.

I am not saying your siding does or does not need replacement but it is not uncommon for people to object to any increase and we are only hearing one side of this argument.




Most people aren't objecting to the project itself but the terrible way it is being managed. No communication from the board (they try to do things in secret which is against the law), nasty comments from financially well-off board members who lack empathy for struggling families, terrible planning, etc. They refuse to provide meeting minutes, which is against the law in our state. Half the community doesn't even know about this project because they don't address it unless directly asked at meetings (to which we get confusing answers to our questions, if we get an answer at all. usually it's just "we'll have to get back to you on that.").

It is true some people will object to anything no matter what. It is also true that a lot of people don't bother to attend meetings, which makes it harder for the board to present their case if no one is there to listen. But they make no effort to communicate clearly. They refuse to provide meeting minutes. One resident is a web developer who offered - for free - to put a website together that anyone can access at any time, and the board refused to allow her to do this.

Hopefully we can vote out the two current members - but we can't get an answer to when or how the vote will take place since everything is virtual now due to the pandemic.

Does anyone know what the reserve requirements are in the IL state condo law or can point me to that part of the law?

GeorgeS21
(Florida)

Posts:3275


10/15/2020 1:40 PM  
Asil,

Isn't your state's condo statute on line?
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