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Subject: NC peeps? Budget updates after a budget is approved?
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MichaelH34
(North Carolina)

Posts:64


11/23/2021 9:50 AM  
Our state says:

"For planned communities created on or after January 1, 1999, and governed by the NC Planned Community Act:
Within 30 days after adoption of any proposed budget, the executive board shall provide to all the lot owners a summary of the budget and a notice of the meeting to consider ratification of the budget, including a statement that the budget may be ratified without a quorum. The executive board shall set a date for a meeting of the lot owners to consider ratification of the budget, such meeting to be held not less than 10 nor more than 60 days after mailing of the summary and notice. There shall be no requirement that a quorum be present at the meeting. The budget is ratified unless at that meeting a majority of all the lot owners in the association or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified by the lot owners shall be continued until such time as the lot owners ratify a subsequent budget proposed by the executive board. NCGS § 47F-3-103(c)"

Our CCRs say:

"8.04 Computation of Monthly Assessments.
(a) Commencing with the fiscal year of the Association which begins January 1, 2019 and
runs through December 31 , 2019, which period is hereinafter referred to as the "Base Year", and
annually thereafter, the Board of the Association shall determine and approve annually an annual
budget covering the estimated Common Expenses for the Development for the upcoming year,
such budget to include a capital contribution or reserve account if necessary for the capital needs
of the Association. The amount set forth in such budget shall constitute the aggregate amount of
annual Assessments for the then applicable year and each Owner shall pay his prorated share of
the same as provided in Section 8.03 above. A copy of the budget setting forth the amount of
annual Assessments levied against the Lots and Dwellings for the following year shall be
delivered to each Owner.

(b) If any budget or the amount of annual Assessments collected by the Association at any
time proves to be inadequate or insufficient for any reason to fully pay all costs and expenses of
the Association and all Common Expenses, then the Board may call a meeting of the Association
for the purpose of approving special Assessments as provided in Section 8.05 below. If the actual
amount of annual Assessments collected in any one year exceeds the actual costs incurred for the
Common Expenses for such year, the excess shall be retained by the Association as a reserve for
subsequent years' Common Expenses."


After having gone through the process, very recently, of getting the budget ratified by the membership, but before the new year has started, we've had unexpected increases that will result in a need to increase the dues (again) by $6/mo for everyone.

Is there any wiggle room here or do we have to go through this process all over again. I suspect I know the answer but IANAL and I'm hoping NC peeps with more experience at this have some straws I can reach for.
MaxB4
(California)

Posts:1594


11/23/2021 10:12 AM  
I think you have to follow state law and start the process over.
JohnC46
(South Carolina)

Posts:11659


11/23/2021 11:43 AM  
Mich

One can argue a Budget is a best guess and subject to change. While true, you have a desired dues increase. Totally different. You have to go through the dues increase process.
AugustinD


Posts:1905


11/23/2021 12:21 PM  
MichaelH34, would you please quote Section 8.05?

So far, this is the part that I feel controls:
Posted By MichaelH34 on 11/23/2021 9:50 AM

(b) If any budget or the amount of annual Assessments collected by the Association at any
time proves to be inadequate or insufficient for any reason to fully pay all costs and expenses of
the Association and all Common Expenses, then the Board may call a meeting of the Association
for the purpose of approving special Assessments as provided in Section 8.05 below."
Facts:

-- Both the ratified budget and the amount of assessments pursuant to the budget are inadequate for the upcoming year.

-- The Board "may" then call a meeting of the owners to approve a special assessment pursuant to Section 8.05. The Board is not required to call this meeting.

-- Does section 8.05 say anything relevant here?

To me, and to be compliant, I think the HOA's options are as follows:

-- Re-do the budget and present it to owners for ratification pursuant to statute and the covenants.

-- Special assess without a special meeting, assuming 8.05 does not say otherwise.

-- Special assess with a special meeting pursuant to 8.05.
MichaelH34
(North Carolina)

Posts:64


11/23/2021 1:02 PM  
AugustinD:

"8.05 Special Assessments.
In addition to the annual Assessments authorized in Section
8.04 above and the Special Assessments authorized in Sections 9.01(b) and 9.03 below, the
Board of the Association may levy in any year special Assessments for Common Expenses or any
extraordinary costs incurred by the Association; provided, however, that any such special
Assessments (other than special Assessments levied pursuant to Sections 9.01 (b) and 9.03
below)
[these refer to assessments needed due to fires in common areas and if insurance is enough to build back without an assessment, or those due to condemnation of common areas]
shall be approved by a majority of the votes of the Owners who are voting in person or by
proxy at the meeting called for the purpose of adopting special Assessments pursuant to
provisions in Section 8.07 below. The Board may make such Special Assessments payable in one
lump sum or in installments over a period of time which may, in the Board's discretion, extend
beyond the then fiscal year in which said special Assessments are levied and assessed. Special
Assessments shall be levied against and payable by each Owner in accordance with the
provisions of Section 9.03 above."

8.07 says in part:

"With respect to all other meetings of
the members of the Association, including, specifically, meetings pursuant to which special
Assessments are to be levied upon each Lot or Dwelling pursuant to Section 8.05 above, there
shall be no specific requirement establishing a quorum and the vote of a majority of the Owners
who are voting in person or by proxy at any such special meeting shall be binding on all of the
members of the Association. "



So yeah, a meeting is required for both ratification of a new budget and a special assessment.

There's an argument to be made for pulling the band-aid off now rather than waiting until the new year, though I hate having to do these kinds of things during the holiday season since it's hard to get paid workers to do work, not to mention volunteers.
AugustinD


Posts:1905


11/23/2021 1:10 PM  
MichaelH34, thank you for posting section 8.05 and the other section that is relevant. I do not see any wiggle room. I favor re-doing the budget and having a meeting to ratify it. I think it's a little cleaner all around.

Most importantly and for what it's worth: Don't beat yourself up regarding having to re-do approval. What's most important is that you are getting the numbers right. (I apologize if I have misread your tone.)

The treasurer's job is the toughest by far of all officer positions and far harder than just being a director.

I think it is those folks who do not admit the first budget that was prepared has become flawed, and do not admit that a correction is needed, that are the problem.
KellyM3
(North Carolina)

Posts:1804


11/23/2021 1:25 PM  
If you must raise dues beyond the approved budget, then restart your budget process.

If a contractor has raised a rate on the HOA but the approved budget can handle it in spite of a discrepancy, I'd move forward.

Timing is hard on annual meetings/budget ratifications because HOAs must budget earlier than many companies' assessment of possible rate/fee changes.
JohnC46
(South Carolina)

Posts:11659


11/23/2021 2:31 PM  
In my SC HOA, the BOD can raise the dues as much as we desire once a year and there is a procedure:
1. On or before 12/01, we must submit a Budget (reflecting the dues increase) for the upcoming year to each owner vis USPS.

2. The new Budget, including increased dues, becomes effective 01/01. We do no need owner approval.

3. Owners could call a Special Meeting to not accept the new Budget. 51% OF ALL OWNERS would have to vote against accepting the new Budget. If this happens, there is an automatic 5% dues increase.

We are in the process of rising dues a bit less than 15% for 2022.


MichaelH34
(North Carolina)

Posts:64


11/24/2021 6:27 AM  
Thanks everyone, the thoughtful replies are much appreciated.
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Forums > Homeowner Association > HOA Discussions > NC peeps? Budget updates after a budget is approved?



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