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Subject: Budget Approval Process
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Author Messages
StevenD6
(Delaware)

Posts:65


01/04/2021 4:33 AM  
Is it standard procedure for most if not all HOA's that the budget needs to be approved by a majority of the homeowners at an annual meeting? The Board recently approved the 2021 budget at their Board Meeting and is not planning to hold an Owners meeting for final approval. They have included an increase in the Management Dues and owners want to make sure the proper procedures are followed. Seems clear to me under Title 25 Chapter 81-324 of the Delaware Uniform Common Interest Ownership Act that the owners have the final approval. I would be interested in any experience or guidance in this area.
JohnT38
(South Carolina)

Posts:452


01/04/2021 4:41 AM  
Posted By StevenD6 on 01/04/2021 4:33 AM
Is it standard procedure for most if not all HOA's that the budget needs to be approved by a majority of the homeowners at an annual meeting? The Board recently approved the 2021 budget at their Board Meeting and is not planning to hold an Owners meeting for final approval. They have included an increase in the Management Dues and owners want to make sure the proper procedures are followed. Seems clear to me under Title 25 Chapter 81-324 of the Delaware Uniform Common Interest Ownership Act that the owners have the final approval. I would be interested in any experience or guidance in this area.




We do not need approval although we always hold a meeting and go over the new budget and explain the rate increase. You need to refer to your governing documents. There is no one answer.
CathyA3
(Ohio)

Posts:1484


01/04/2021 5:40 AM  
Depends on the state. Some state laws require that homeowners be allowed to vote on budgets, but as far as I know they are a small majority.

Personal opinion: laws like this are a license to commit financial suicide.

For one, few homeowners have the knowledge or desire to understand community association finances. They will vote "no" just because they don't want to spend the money - except that the expenses don't just magically disappear because nobody wants to pay for them.

For two, board members have duty to act in the best interest of the association. Individual owners do not - they are free to act in their own self-interest, even if that self-interest is harmful to the community.

What usually happens in these cases is that the community starts to fall apart, and at some point they can no longer kick the can down the road. Then it's time for a nice, fat special assessment, with much wailing and gnashing of teeth, followed by attempts to blame the board for their inability to protect people from themselves.
CathyA3
(Ohio)

Posts:1484


01/04/2021 5:41 AM  
Posted By CathyA3 on 01/04/2021 5:40 AM
Depends on the state. Some state laws require that homeowners be allowed to vote on budgets, but as far as I know they are a small majority.

....




Small MINORITY.
StevenD6
(Delaware)

Posts:65


01/04/2021 5:51 AM  
Thank you for your response.

It appears that Delaware is one of those states that require the Homeowners to vote on the budget. With that said do you recommend that the Board follow the rules and have the Homeowners vote or simply see if anyone objects?
TimB4
(Virginia)

Posts:17180


01/04/2021 6:01 AM  
Steven,

Everyone on this site would recommend that the Board (and members) comply with the rules and statutes that govern their Association.


Keep in mind, there are two ways to have approval of the budget:

1) Vote for approval.
2) Ask if there are any objections - if none, the budget is adopted.

Per Roberts Rules of Order:

If the board is in obvious agreement, the chairperson may save time by stating, “If there is no objection, we will adopt the motion to…” Then wait for any objections. Then say, “Hearing no objections, (state the motion) is adopted.” And then state any instructions.
StevenD6
(Delaware)

Posts:65


01/04/2021 6:09 AM  

Would you say that items 2 would apply in our case after reading our statute below? Seems like there is only one option and to have a vote for approval by the Homeowners, I don't see where they can approve any other way but that is why I am asking for assistance. Seems black and white but I am not an attorney so I may not be reading this correctly.




§ 81-324 Adoption of budget.
(a) The executive board shall, at least annually, prepare a proposed budget for the common interest community. In a condominium or
cooperative, the proposed budget shall include a line item for any required funding of a repair and replacement reserve. Within 30 days
after adoption of any proposed budget after the period of declarant control, the executive board shall provide to all unit owners a summary
of the budget, including any reserves and a statement of the basis on which any reserves are calculated and funded. Simultaneously, the
executive board shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 60 days
after providing the summary. Unless at that meeting a majority of all unit owners or any larger vote specified in the declaration reject the
budget, the budget is ratified, whether or not a quorum is present. If a proposed periodic budget is rejected, the periodic budget last ratified
by the unit owners must be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.
(b) In addition to adoption of its regular periodic budget, the executive board may at any time propose a budget which would require
a special assessment against all the units. Except as provided in subsection (c) of this section, the special assessment is effective only
if the executive board follows the procedures for ratification of a budget described in subsection (a) of this section and the unit owners
do not reject that proposed special assessment.
(c) If the executive board determines by unanimous vote that the special assessment is necessary in order to respond to an emergency,
then: (i) the special assessment shall become effective immediately in accordance with the terms of the vote; (ii) notice of the emergency
assessment shall be promptly provided to all unit owners; and (iii) the executive board shall spend the funds paid on account of the
emergency assessment solely for the purposes described in the vote.
(76 Del. Laws, c. 422, § 2; 77 Del. Laws, c. 91, §§ 59, 60, 82.)
TimB4
(Virginia)

Posts:17180


01/04/2021 6:12 AM  
In my opinion, the question could be asked either way.
JohnC46
(South Carolina)

Posts:10366


01/04/2021 7:25 AM  
Our owners do not get to vote on the budget. That said, they could indirectly vote on it as they could call a Special Meeting to reject the Budget but 51% OFF ALL MEMBERS would have to vote to reject. This has never happened even when in one budget, we raised the Annual Assessment (Dues) by 40%. Yes 40%.

I admit we did a good job of justifying the 40% increase. Meetings, notices, justification spreadsheets, etc. Not that all liked it but we only had one owner challenges us in writing. One reply drawing his attention to one section in our Covenants (where it said we could), and he stopped.

SheliaH
(Indiana)

Posts:3670


01/04/2021 8:01 AM  
This reads to me like a majority of homeowners (a number larger than the quorum required to hold the meeting) have to attend and vote to reject the proposed budget. If You don't get a majority of those present to reject the budget, it passes whether the quorum was met or not. Of course I'm not an attorney, so it may be best to run this past him or her.

Seems to me the board should already know the answer to this question and plan for this even if you're pretty certain the budget will pass. In this case, you said the assessment would increase because the property management company's fees are increasing, so why don't you just explain that to the homeowners? Give them the numbers and a description of what the company does. In fact, have the property manager and his/her supervisor attend the meeting so people can ask questions?

No one likes increases, but are more likely to agree if the board is honest enough to explain and show where the money's going. You should be joining this whether the assessment increases or not.

If you don't want to go through this every year, you may want to propose to the homeowners that the documents be amended to allow the board to set increases up to a certain percentage over the current years assessment. Anything higher would require homeowner approval. Our documents set the maximum increase as 5%, so that could be a start.

StevenD6
(Delaware)

Posts:65


01/04/2021 8:16 AM  
I am not on the board but was in attendance for the last Board Meeting where they informed us of the Management Fee increase. No opportunity was provided for Q&A and one Homeowner asked about the process and was ignored/shutdown by one of the board members by simply saying they object to his question. They proceeded to approve the budget amongst the 5 board members. We just want to make sure the correct process is followed so we don't set any bad precedents since this is the first year our new development is now run by the homeowners. Previously to this the developer was in charge and the homeowners had very little say but at least there was dialogue. If the bylaws say that a Homeowner Meeting needs to be scheduled and 50%plus 1 is needed to ratify then why wouldn't we simply do what the bylaws say??
JohnC46
(South Carolina)

Posts:10366


01/04/2021 8:53 AM  
Posted By StevenD6 on 01/04/2021 8:16 AM
I am not on the board but was in attendance for the last Board Meeting where they informed us of the Management Fee increase. No opportunity was provided for Q&A and one Homeowner asked about the process and was ignored/shutdown by one of the board members by simply saying they object to his question. They proceeded to approve the budget amongst the 5 board members. We just want to make sure the correct process is followed so we don't set any bad precedents since this is the first year our new development is now run by the homeowners. Previously to this the developer was in charge and the homeowners had very little say but at least there was dialogue. If the bylaws say that a Homeowner Meeting needs to be scheduled and 50%plus 1 is needed to ratify then why wouldn't we simply do what the bylaws say??



Do not confuse 51% of those at a Meeting and 51% of all owners. Many do confuse the two.
SheliaH
(Indiana)

Posts:3670


01/04/2021 9:08 AM  
Did the homeowners get a copy of the proposed budget before the meeting? If so, did you read it to see what kind items increased besides the management fee? Did you compare it to last year's income and expense statements to track what went over budget? Did you read board meeting minutes to see if that was discussed and how it was addressed?

You were at the meeting - did you speak up when the neighbor asked his/her question and was "shut down?" This is when homeowners have to speak up - Mr so and do, what's wrong with that question if you're increasing the assessment , we have a right to know why and you have a fiduciary duty to explain why - this is everyone's money, not just yours.

Would drama ensue? Possibly - depends on how the questionnaire n was asked and if everyone else made their feelings known it may be easy to shut down one person, but a roomful? That was also a great time to bring up your question about the process. How can people were there and was that a quorum? Did the number exceed the quorum?

You may not be able to change this vote, but you can make it clear to the board homeowners deserve and expect accurate complete and candid conversations regarding association issues, especially on the budget. Insist that board member explain why he/she objected to the question. If there's no answer or gibberish, perhaps that's the person you should target to vote out of office - that may send a message to the rest.
JohnC77
(Washington)

Posts:434


01/04/2021 9:36 AM  
Posted By StevenD6 on 01/04/2021 6:09 AM

Would you say that items 2 would apply in our case after reading our statute below? Seems like there is only one option and to have a vote for approval by the Homeowners, I don't see where they can approve any other way but that is why I am asking for assistance. Seems black and white but I am not an attorney so I may not be reading this correctly.




§ 81-324 Adoption of budget.
(a) The executive board shall, at least annually, prepare a proposed budget for the common interest community. In a condominium or
cooperative, the proposed budget shall include a line item for any required funding of a repair and replacement reserve. Within 30 days
after adoption of any proposed budget after the period of declarant control, the executive board shall provide to all unit owners a summary
of the budget, including any reserves and a statement of the basis on which any reserves are calculated and funded. Simultaneously, the
executive board shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 60 days
after providing the summary. Unless at that meeting a majority of all unit owners or any larger vote specified in the declaration reject the
budget, the budget is ratified, whether or not a quorum is present. If a proposed periodic budget is rejected, the periodic budget last ratified
by the unit owners must be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.
(b) In addition to adoption of its regular periodic budget, the executive board may at any time propose a budget which would require
a special assessment against all the units. Except as provided in subsection (c) of this section, the special assessment is effective only
if the executive board follows the procedures for ratification of a budget described in subsection (a) of this section and the unit owners
do not reject that proposed special assessment.
(c) If the executive board determines by unanimous vote that the special assessment is necessary in order to respond to an emergency,
then: (i) the special assessment shall become effective immediately in accordance with the terms of the vote; (ii) notice of the emergency
assessment shall be promptly provided to all unit owners; and (iii) the executive board shall spend the funds paid on account of the
emergency assessment solely for the purposes described in the vote.
(76 Del. Laws, c. 422, § 2; 77 Del. Laws, c. 91, §§ 59, 60, 82.)



According to what you posted, a meeting of the members is required, but quorum is NOT required. No vote to approved is require only one to reject.

Soif 6 people show up to the meeting and 4 vote agaisnt, I would say Houston has a problem.
StevenD6
(Delaware)

Posts:65


01/04/2021 9:43 AM  
Thank you, that is how I read it as well.
KerryL1
(California)

Posts:7758


01/04/2021 11:56 AM  
To my eye, the wording is a little ambiguous: "Unless at that meeting a majority of ALL unit owners or any larger vote specified in the declaration reject the
budget, the budget is ratified, whether or not a quorum is present."

It doesn't state a majority of all owners present at the members meeting, but, instead, it states "all unit owners."
JohnC46
(South Carolina)

Posts:10366


01/04/2021 3:16 PM  
Posted By KerryL1 on 01/04/2021 11:56 AM
To my eye, the wording is a little ambiguous: "Unless at that meeting a majority of ALL unit owners or any larger vote specified in the declaration reject the
budget, the budget is ratified, whether or not a quorum is present."

It doesn't state a majority of all owners present at the members meeting, but, instead, it states "all unit owners."



I read it the same. A majority of ALL UNIT OWNERS, not simply a majority of those in attendance at the meeting unless all unit owners showed up at the meeting.
JohnC46
(South Carolina)

Posts:10366


01/04/2021 3:17 PM  
Posted By JohnC46 on 01/04/2021 3:16 PM
Posted By KerryL1 on 01/04/2021 11:56 AM
To my eye, the wording is a little ambiguous: "Unless at that meeting a majority of ALL unit owners or any larger vote specified in the declaration reject the
budget, the budget is ratified, whether or not a quorum is present."

It doesn't state a majority of all owners present at the members meeting, but, instead, it states "all unit owners."



I read it the same. A majority of ALL UNIT OWNERS, not simply a majority of those in attendance at the meeting unless all unit owners showed up at the meeting.



ADD ON
This is a very common misconception. As I said earlier 51% of those at a meeting is not the same thing as 51% OF ALL UNIT OWNERS.
FloridaC1
(Florida)

Posts:14


01/04/2021 3:47 PM  
No, it is not "standard" procedure for homeowners to approve a budget; it is normally approved by your Board of Directors. Read your documents as your By-laws will discuss your budget process.
KellyM3
(North Carolina)

Posts:1599


01/04/2021 4:01 PM  
The homeowners are not called to the annual meeting to approve the budget.

The majority of all homeowners must appear and subsequently vote to reject the budget.

It's as if they would vote "YES" in favor of rejection. The HOA board approved the budget earlier so the business flow is towards the budget taking effect unless homeowners truly revolt.
AugustinD


Posts:4828


01/04/2021 4:19 PM  
Posted By StevenD6 on 01/04/2021 4:33 AM
Is it standard procedure for most if not all HOA's that the budget needs to be approved by a majority of the homeowners at an annual meeting?
What is standard is irrelevant. What matters is the statute you so carefully and beautifully quoted here, and which I checked.
Posted By StevenD6 on 01/04/2021 4:33 AM

The Board recently approved the 2021 budget at their Board Meeting and is not planning to hold an Owners meeting for final approval. They have included an increase in the Management Dues and owners want to make sure the proper procedures are followed. Seems clear to me under Title 25 Chapter 81-324 of the Delaware Uniform Common Interest Ownership Act that the owners have the final approval.
Your board is in violation of the the Delaware Uniform Common Interest Ownership Act, Section 81-324.

If anyone at your HOA wants to make this required meeting actually happen, I suggest writing the Board a brief letter that quotes Section 81-324; asks for the meeting; and adds that, if the Board does not want to have a meeting, then the Owners request non-binding alternate dispute resolution, pursuant to Delaware Statute section 81-302 (a) (18).

Anything less of interested owners is the stuff of [chicken noises].
KellyM3
(North Carolina)

Posts:1599


01/04/2021 6:22 PM  
The board needs to hold a meeting to submit the new budget for ratification but many boards could and will argue that the pandemic changes things...I disagree with that but attorneys will argue for special consideration.

The budget will take effect unless an outright majority of property owners appear at vote NO on budget ratification. Otherwise, the budget automatically takes effect.

On second reading, you deserve a meeting at the least.
NpS
(Pennsylvania)

Posts:4005


01/04/2021 9:10 PM  
Posted By StevenD6 on 01/04/2021 4:33 AM
Is it standard procedure for most if not all HOA's that the budget needs to be approved by a majority of the homeowners at an annual meeting? The Board recently approved the 2021 budget at their Board Meeting and is not planning to hold an Owners meeting for final approval. They have included an increase in the Management Dues and owners want to make sure the proper procedures are followed. Seems clear to me under Title 25 Chapter 81-324 of the Delaware Uniform Common Interest Ownership Act that the owners have the final approval. I would be interested in any experience or guidance in this area.



The key word in the statute is "ratify." Ratification is not about a right to approve. It's about a right to override the Board-approved budget. Your statute says that it takes more than 50% of the owners (not more than 50% of the attendees at a meeting) to override the Board-approved budget. That's a heavy burden.

Let's say you have 200 units. In order to override the Board-approved budget, you need 101 votes against ratification. Yet many associations have trouble getting even 40% participation in voting. 40% gets you only 80 votes, not enough to override the Board-approved budget. So even if every owner of the 40% who participated voted against ratification - which is highly unlikely - you would still be short 21 votes.

Please note that, per the specific language of 81-324(a), the Board-approved budget "is ratified" unless more than 50% of all the owners vote against it. As stated above, it would be really difficult to override.

----------

Do I think that your Board acted in accordance with the statute? Of course not.

But the real questions are, what kind of remedy can you reasonably expect and who's going to grant it?

You can lodge a complaint with DE's Ombudsman's Office. But they require that you go through your Association's Internal Dispute Resolution process first. So you need to fill out a bunch of forms and provide a bunch of documents that prove that you went through a process in your Association that may not even exist. In fact, the DE Complaint form must be accompanied by a copy of the Association's response to your complaint. What if they don't respond? Seems to me like a lot of time wasted and probably not worth the effort.

Another option is to demand a Special Meeting. I did not look a DE's statute, but in the states that I am familiar with, if you get enough signatures on a petition, you can demand a special meeting. If you can't get the required number of signatures, that would be a good indication that not enough people in your Association are upset enough about the Board-approved budget to get anywhere close to disapproval by more than 50% of all owners. Here again a lot of time and effort.

Finally, if you try to sue, it's likely that the courts will redirect you to the Ombudsman's Office if you haven't gone that route already. Please realize that most state Ombudsman's Offices were set up to direct HOA disputes away from litigation. You can spend your time finding out how DE courts deal with these issues, but again - a lot of time and effort. To what end?

Even if you did get to court, could you show that you could get enough votes to override the Board-approved budget. I think not.

I won't weigh in on whether I think your Board is foolish or not in doing things the way they do. Sometimes it is what it is because the effort to "make things right" is just too overwhelming with little chance of reaching the desired objective.

Best of luck.


Sikubali jukumu. Read all posts at your own risk.
StevenD6
(Delaware)

Posts:65


01/05/2021 5:28 AM  
Would you agree that at a minimum an Owner Meeting needs to be scheduled as required in the bylaws? I appreciate the clarification around greater than 50% need to reject and that is of all homeowners not just on who attends the meeting. Very significant understanding. I don't think there is enough consternation around the increase in the budget to reject, just want the process to work as designed so we don't start bad habits so early in our existence.
NpS
(Pennsylvania)

Posts:4005


01/05/2021 8:05 AM  
Posted By StevenD6 on 01/05/2021 5:28 AM
Would you agree that at a minimum an Owner Meeting needs to be scheduled as required in the bylaws? I appreciate the clarification around greater than 50% need to reject and that is of all homeowners not just on who attends the meeting. Very significant understanding. I don't think there is enough consternation around the increase in the budget to reject, just want the process to work as designed so we don't start bad habits so early in our existence.


Glad that the clarification was helpful Steven.

I completely agree that the owner meeting is a Bylaw requirement. And it's an important one.

But like it or not, some Associations don't follow their own requirements. Many possible causes (lack of knowledge, desire to keep on doing things the way they're familiar with, misinterpretations, laziness, a domineering voice on the Board, someone said we didn't have to, or whatever).

Should your Board follow the law? Sure. Would the DE Ombudsman's Office respond to your complaint about the lack of an annual meeting? Absolutely. That kind of violation will be a big deal to them. How long will that take and what hoops will you have to jump through? Difficult to say. Will it be worth it to you in the end to pursue that route? That's up to you.

I think it very relevant that you don't think there's sufficient "consternation." The Ombudsman's office might give your Association a slap on the hand for not holding a meeting - But at the end of the day, the budget is going to be whatever the Board decided it should be. That's not necessarily a bad thing - Because if the increases were truly outrageous, then the "consternation" level would be much greater than it is, and the members might be able to override the budget.

A slap on the hand from the Ombudsman's office might change things for next year. If that's your objective, you might want to give it a shot. Once again, it's your time and effort.

Best.

Sikubali jukumu. Read all posts at your own risk.
NpS
(Pennsylvania)

Posts:4005


01/05/2021 8:45 AM  
From the DE Ombudsman's office. You might want to share it with your Board and let them know that you are thinking about filing a complaint with the State.

https://attorneygeneral.delaware.gov/wp-content/uploads/sites/50/2017/03/ELECTION_SERVICES_Secret_Ballot_Draft_3.pdf

Sikubali jukumu. Read all posts at your own risk.
JohnC46
(South Carolina)

Posts:10366


01/05/2021 9:49 AM  
Posted By StevenD6 on 01/05/2021 5:28 AM
Would you agree that at a minimum an Owner Meeting needs to be scheduled as required in the bylaws? I appreciate the clarification around greater than 50% need to reject and that is of all homeowners not just on who attends the meeting. Very significant understanding. I don't think there is enough consternation around the increase in the budget to reject, just want the process to work as designed so we don't start bad habits so early in our existence.



I do not believe an Owners Meeting is required to discuss the budget. It can be done at the Annual Meeting.

Learn about Special Meetings and how to call them if you feel the need to have a meeting.

You seem to be leaning toward owners should be micro-managing BOD decisions.

KerryL1
(California)

Posts:7758


01/05/2021 10:27 AM  
Good to see your insights, NpS. Hope you stick around for a while this time. There's a thread called "Board member refuses to Act" for a PA poster. Maybe you know some PA legal nuances to help them?

StevenD6
(Delaware)

Posts:65


01/05/2021 10:37 AM  
Interesting take on my comments and feeling that I am leaning towards micro managing the Board. I am far from a micro manager but we are a new community and want them to follow the rules and set the right precedent for future boards and decisions. They are instituting a price increase to the Management Assoc Dues in 2021 but with little documentation and explanation to the community. I don't have an issue with the increase just want transparency for the reasons why and make sure we follow the correct process in getting it done.

StevenD6
(Delaware)

Posts:65


01/05/2021 10:37 AM  
Interesting take on my comments and feeling that I am leaning towards micro managing the Board. I am far from a micro manager but we are a new community and want them to follow the rules and set the right precedent for future boards and decisions. They are instituting a price increase to the Management Assoc Dues in 2021 but with little documentation and explanation to the community. I don't have an issue with the increase just want transparency for the reasons why and make sure we follow the correct process in getting it done.

JohnC77
(Washington)

Posts:434


01/05/2021 10:49 AM  
What if the annual meeting is in March and their fiscal year ends in December.

Some board members might be smart enough to hold a budget ratification in November if their annual meeting is called for in the same month.

How is the budget actually ratified? Do owners know they have a voice in whether a budget is passed? Does the board call a special meeting for fives minutes, where two people show up and seeing no objection, ratify a budget?

Another issue to consider. To take action at a meeting, whether board or member, quorum must be present. The statue states Unless at that meeting a majority of all unit owners or any larger vote specified in the declaration reject the budget, the budget is ratified, whether or not a quorum is present.

NpS
(Pennsylvania)

Posts:4005


01/05/2021 1:12 PM  
Posted By KerryL1 on 01/05/2021 10:27 AM
Good to see your insights, NpS. Hope you stick around for a while this time. There's a thread called "Board member refuses to Act" for a PA poster. Maybe you know some PA legal nuances to help them?




Task completed as requested. Happy New Year to you and to everyone else on the forum.

Sikubali jukumu. Read all posts at your own risk.
JohnC46
(South Carolina)

Posts:10366


01/05/2021 1:30 PM  
To make it clear, below is how our covenants read.

Section 3. Contribution.

It shall be the duty of the Board to prepare a budget covering the estimated costs of operating the Association during the coming year, which may, if applicable, include a capital contribution or reserve in accordance with a capital budget separately prepared. The Board shall cause the budget and the assessments to be levied against each Lot for the following year to be delivered to each member at least thirty (30) days prior to the end of the current fiscal year (or, if the assessment has not been established at the time an Owner purchases such Owner's Lot, at least thirty (30) days prior to the due date of the first installment in the ease of the initial budget). The budget and the assessment shall become effective unless disapproved at a meeting by a majority of the Total Association Vote. Notwithstanding the foregoing, however, in the event the membership disapproves the proposed budget or the Board fails for any reason so to determine the budget for the succeeding year, then and until such time as a budget shall have been determined, as provided herein, the budget in effect for the then current year shall continue for the succeeding year, but shall be increased by a factor equal to the percentage increase in the prior year of the US Consumer Price Index (CPI-U) for All items in Urban Areas as published by the United States Bureau of Labor Statistics.

SUMMARY/COMMENTS/DE-LEGALFIED:

1. The BOD can raise the dues any amount needed as long as we notify all owners via presenting the upcoming year's budget (effective 01/01) on or before 12/01. This is the only time during the year we can increase dues.

2. The Budget (including the dues increase) become effective 01/01 unless disapproved at a meeting by a majority of the total association vote. This would mean calling a Special Meeting (needs 10% of owners to call a Special Meeting and 20% of all owners in attendance to have a Quorum at the meeting) and 51% of ALL OWNERS disapprove the budget. I repeat, 51% of ALL OWNERS not just 51% of owners at the Special Meeting. Still confusion out here on the differences between 51% of all owners and 51% of owners at a meeting.

3. If the Budget is disapproved, then the existing Budget stays in place and gets increased by the CPI-U which is, as I understand it, 2-3%.

The above is how we raised our dues 40% effective 01/01/2020.
SheliaH
(Indiana)

Posts:3670


01/05/2021 1:33 PM  
I wouldn't call it micro-managing - yet. You're correct in wanting the rules followed, along with explaining to the homeowners why some costs go up. As I said earlier, no one likes assessment increases, but most thinking people understand inflation. What your new community is about to find out (I'm sure the board has already) is that developers typically keep assessments low to sell the homes. when the community's turned over to the homeowners, the new board usually finds out those assessments really are too low to provide services and fund reserves, so they have to raise assessments - and people get pissed.

This is why I'd love to see state legislation that mandates some sort of education for new boards by the developers or at least be more realistic about association costs at the start. Of course, most developers don't bother to educate the homeowners on the ins and outs of homeowner association management - maybe they think people will run away from the responsibility (which some of them will) or because they don't care if the place explodes after they leave, and why should they? They've already been paid.


This could be part of the reason that board member tried to "shut down" the homeowner who asked about the fee increase - instead of being candid, he or she may have feared the response would make him look stupid or incompetent. However, people getting P.O'ed at a HOA board isn't new (why else does this website exist), so what the board AND the homeowners need is some education on best practices for HOA management.

Everyone else here knows my next suggestion - you or the board (preferably both) may want to have a look at the Community Association Institute website. This is a national organization of HOAs and the companies that serve them, and while not everyone likes every stance they take (depending on what's going on in your state), they do have a great education section where you can get books and brochures on a number of HOA issues, and many are geared for people who don't know anything about HOAs. Your area may even have a local chapter that sponsors educational seminars where new and old board members can meet people from other communities to exchange ideas and horror stories. Of course, you can still wear out the search button on this website and find old and new conversations on a number of association issues and see what your community can adapt or avoid at all costs.

For now, get that meeting called as soon as possible - and if this board doesn't cooperate, you and your neighbors may find voting them out may be the first task you need to do in order to find people who will follow the rules and be more candid and transparent with the homeowners. But the board isn't the only one - perhaps now would be a good time to organize some advisory committees to take a long look at the documents to see what makes sense and what may need to be changed - these aren't the 10 commandments set in stone. Just be sure you get a good HOA attorney to guide you because you want the changes to stand up in court. You can start with something as simple as deleting references to the developer in your documents. Good luck!
StevenD6
(Delaware)

Posts:65


01/05/2021 4:30 PM  
Appreciate everyone's input on this matter, it was extremely informative and educational. Thanks for taking the time to answer my questions in great detail and providing very thorough and thoughtful responses.
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