Annual Assessment Period same as Fiscal year?

Started by MaryM34 • 18 replies • 4449 views

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MaryM34 (South Carolina)
Posts: 10

Posted:

My HOA Board is telling the homeowners that our annual assessment period is February 1 - January 31 and that our annual budget and fiscal year are from January 1 - December 31. That is how they have interpreted our CC&Rs which read "At least thirty (30) days before February 1 of each year, the Board of Directors shall fix the amount of the Annual Assessment against each lot...Written notice of any change in assessment rate shall be sent to every Owner. The annual assessments shall be due and payable in advance on January 1 of each year..." Our documents also state "It shall be the duty of the Board of Directors to send written notice of each assessment to every Owner subject thereto at least thirty (30) days in advance of each annual assessment period". The written notice, which included a dues increase, was received by the homeowners on December 29, 2012. When some owners questioned the timeliness of the notice, we were given this explanation. I would appreciate knowing if the Annual Assessment Period and the Fiscal Year must be the same.
Thank you for your insight.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Does it really matter? Your HOA needs to raise more money to pay it's bills. A HOA is ONLY funded by it's members for it's members. If they raised your dues no matter what the date, it sounds like your HOA is working on resolving some financial issues. I would ask questions about why the raise in dues rather than the proper date it is done.

Former HOA President

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MaryM34 on 01/17/2013 8:09 AM
our CC&Rs which read "At least thirty (30) days before February 1 of each year, the Board of Directors shall fix the amount of the Annual Assessment against each lot...Written notice of any change in assessment rate shall be sent to every Owner.

Based on your citation of the CC&Rs, I would interpret that:

Assessments must be set by January 2.

The issue appears to be when the "assessment year" is (as it defines when notices must be sent to increase assessments). If this term is not defined in your governing documents it can be open for interpretation by the Board.

I can see an argument for January 2-January 1 and for Feb 1 to Jan 31. If the membership and the Board can not agree, I would suggest that the Board seek a legal interpretation from an attorney. If the membership and the Board still can not agree, then it may require a court of law rule what the assessment year is.

PaulM18 (Virginia)
Posts: 46

Posted:

I know for our HOA - our assessment period and FY is Jan 1 to Dec 31st.

However, we have shifted our actual payment due date to March 1st to give our owners more of a breather after the holidays. Our bills in January and Feb are minimal and covered with funds we carry over from year to year.

Paul

MaryM34 (South Carolina)
Posts: 10

Posted:

Thanks, Paul. That sounds fair and reasonable on the part of your Association. My situation seems illogical because we're told the assessment period begins in February, but we must pay by January 30 or face late charges and other fees. Plus, our FY is Jan - Dec. This is the first time in 8 years since I've lived here that this has happened. The developer turned the Association over to us last year and now we have a Board of homeowners. Our documents state that we are to receive our assessment invoice 30 days prior to the assessment period and several homeowners questioned why we got them only 3 days before. So, then we got the ruling that our assessment period begins one month later in February. We have a lot of other issues to work out and definitely need to re-write our documents for the homeowners' best interests and understanding. Sadly, in South Carolina the HO Association Act that was proposed in the General Assembly has been blocked by the Property Managers Association. It would benefit the homeowners.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Mary

Do not assume all we SC HOA homeowners wanted that bill passed. Some of us are happy it died.

Overall, the SC legislature is not the sharpest knife in the draw. I can pretty well assure you they would screw the pooch with a HOA bill.

MaryM34 (South Carolina)
Posts: 10

Posted:

John,
You may be right. But from what I read in the contents of the bill, the homeowners in my community would benefit greatly from it. We may be the exception, though, as we have closed board meetings, no minutes, no annual review or audit of the finances for the past 12 years, no access to the books and records, maintenance of property outside our boundaries, and co-mingling of funds with an outside HOA.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Mary,

Most Associations are incorporated (typically as a nonprofit corporation). As a corporation the Association must comply with the applicable corporate laws.

The SOUTH CAROLINA NONPROFIT CORPORATION ACT (if applicable), specifically SECTION 33-31-1602, gives the members the right to inspect the records of the corporation. Any request made to your Board to inspect the records should be made under this statute and it would be good to cite the statute in your request. Here is what it says:

(a) Subject to subsection (e) and Section 33-31-1603(c), a member is entitled to inspect and copy, at a reasonable time and location specified by the corporation, any of the records of the corporation described in Section 33-31-1601(e) if the member gives the corporation written notice or a written demand at least five business days before the date on which the member wishes to inspect and copy.

(b) Subject to subsection (e), a member is entitled to inspect and copy, at a reasonable time and reasonable location specified by the corporation, any of the following records of the corporation if the member meets the requirements of subsection (c) and gives the corporation written notice at least five business days before the date on which the member wishes to inspect and copy:

(1) excerpts from any records required to be maintained under Section 33-31-1601(a), to the extent not subject to inspection under Section 33-31-1602(a);

(2) accounting records of the corporation; and

(3) subject to Section 33-31-1605, the membership list.

(c) A member may inspect and copy the records identified in subsection (b) only if:

(1) the member's demand is made in good faith and for a proper purpose;

(2) the member describes with reasonable particularity the purpose and the records the member desires to inspect; and

(3) the records are directly connected with this purpose.

(d) This section does not affect:

(1) the right of a member to inspect records under Section 33-31-720 or, if the member is in litigation with the corporation, to the same extent as any other litigant; or

(2) the power of a court, independently of this chapter, to compel the production of corporate records for examination.

(e) The articles or bylaws of a religious corporation may limit or abolish the right of a member under this section to inspect and copy any corporate record.

HISTORY: 1994 Act No. 384, Section 1.

Hope this helps.

Tim

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

My situation seems illogical because we're told the assessment period begins in February, but we must pay by January 30 or face late charges and other fees. Plus, our FY is Jan - Dec.

Who cares. Just pay them every year before Jan 30. Problem solved.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

In fact, pay them in September if you want so you dont have to worry about being late.

MaryM34 (South Carolina)
Posts: 10

Posted:

Tim,
Thank you so much. This is exactly what I need. I really appreciate that you take the time to read my entire post and reply with helpful resources.

Do you have an opinion on whether a resident who is not an owner but rather a renter can serve on the Board? The following is from the SC Nonprofit Corporation Act and I interpret it to say the renter is not a member as he is not entitled to vote even by virtue of being a director. We have a renter serving as VP. Appreciate your thoughts.

(23)(a) "Member" means a person entitled, pursuant to a domestic or foreign corporation's articles or bylaws, without regard to what a person is called in the articles or bylaws, to vote on more than one occasion for the election of a director or directors or any other matter which under the terms of this chapter requires approval by the members.

(b) A person is not a member by virtue of any of the following:

(A) any rights the person has as a delegate;

(B) any rights the person has to designate or appoint a director or directors; or

(C) any rights the person has as a director.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Mary,

A member, a Director and an Officer are three different positions even if they are held by the same individual.

A member is typically the registered owner/s of a property. Typically a member may vote at the annual meeting for Directors.

A Director is an individual elected or appointed to the Board of Directors to make decisions and implement the authority of the Association. Each Director has one vote that is cast for each issue put before the Board that requires a vote.

An Officer is an individual appointed by the Board to oversee the day to day operations of the Association and carry out the decisions of the Board. Officers are typically appointed from amongst the Directors. When that happens, that individual is serving in two different capacities.
Officers have no vote on the Board.

An Association may adopt qualification requirements for Directors (example: must be a member, must be in good standing, no more than one individual may serve per lot, etc.) and/or Officers (example: the President must be a Director). These qualifications would be within your governing documents. If the governing documents are silent on qualifications then anyone (and I mean anyone, including me) may be considered a candidate for the Board and, if elected or appointed, may serve as a Director and/or Officer.

Therefore, you will need to read your governing documents to determine if there are any limitations on who may serve.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MaryM34 on 01/18/2013 7:12 PM
I interpret it to say the renter is not a member as he is not entitled to vote even by virtue of being a director. We have a renter serving as VP. Appreciate your thoughts.

I think my last answer may be confusing (darn lack of edit). Let me try again.

You are partially correct in your interpretation. A renter is not a member and therefore may not cast a vote at the annual meeting unless proxy voting is allowed and they are appointed as a proxy for a member.

You are incorrect where you interpret that as a Director they may not vote at a Board meeting. Members do not cast votes at Board meetings, only Directors cast a vote. Therefore, the individuals status of being a member or not is not relevant. If they were properly elected or appointed as a Director, as a Director they get to cast one vote for each decision that is voted on at the Board meeting.

To determine if there are any qualifications that must be met to serve as a Director, you will need to read your governing documents. If the governing documents are silent on qualifications, then anyone who is properly elected or appointed to serve as a Director may serve.

I hope this explained it better.

Tim

MaryM34 (South Carolina)
Posts: 10

Posted:

Tim,

Excellent and very clear. I'll be analyzing my documents this weekend.

Thanks a million!
Mary

TimB4 (Tennessee)
Posts: 21,059

Posted:

Mary,

Make sure you read all the governing documents.

The CCR's (Covenants, Conditions, and Restrictions) are publicly recorded deed restrictions. They typically identify the requirement for Assessments, how assessments are applied, creates the Association known as "Your HOA" and identifies what responsibilities the Association has. They also establish what may or may not be done on the property.

The Articles of Incorporation are typically publicly recorded documents with the State corporation commission. They create the entity known as "Your HOA, Inc." and specify the powers granted to the Corporation (typically based on State statutes) and the purpose of the Corporation.

The Bylaws specify the procedures to elect Directors, appoint Officers, identify the core duties of the Directors and Officers and establish other procedures to be used in running the Association.

Resolutions are additional rules, regulations and/or procedures that are adopted for common areas and amenities as well as clarify gray areas in the other documents (example: CC&Rs may authorize the Association to enforce the covenants, the CC&Rs and/or Bylaws may specify the options to gain compliance (i.e. fines, legal action, etc.) but a resolution would establish the procedure to be used to establish if a violation exists and how to exercise the options available).

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I say a renter is NOT a member of the HOA. It wouldn't make any sense if they were. It is called a HomeOWNERS Association for a reason. A renter shouldn't even be attending the meetings technically. However, I will say there are some great renters out there who are involved and care about their community. Unfortunately, that still doesn't make them qualified to be a HOA member.

Now some documents may state that one may not be an owner. Here's my issue with that. This may be a leftover statement whenever the developer was in control. When a HOA is in control of the developer, whoever they assigned on their board did NOT have to be a member of the HOA. They may have hired someone or had an employee of their company represent them at HOA meetings. Hence why the statement is in there about not being an owner. However, whenever a HOA is taken over by the owners and out of developer control, many HOA's fail to update their documents or do it properly. You can still have references to the builders and the two system voting in your documents and the developer was gone years ago. That just means your HOA needs to update your documents on record at the courthouse. Which they tell you how to do in the documents.

I have found that when updating the documents that this statement about ownership being a requirement may be overlooked since it's kind of a blip on the overall documents. So it then gets incorporated by accident and then gone by law after that. So it's best that when updating the documents to go over it with a fine tooth comb and really eliminate ALL references to the developer even ones like this one on what qualifies one to be a member. It just doesn't make sense that someone walking down the street can come into your HOA and become a member doesn't it?

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Mary

Based on what you say, the BOD is being very secretive and even in SC, they cannot be. Tim covered it well. Your rights will be more under the SC Articles of Incorporation, Non Profit.

Also you may need to read your Covenants and Bylaws closer. As an example our Bylaws dictate the date and time of our annual meeting. They aslo outline how and when meetings can be called. They also specify that all meeting of the BOD are open to all owners.

Generally to change any portion of them will take a majority of owners approving the changes. You might also have Rules and Regulations which can be passed by the BOD alone. In many cases, a BOD will try and get around Covenants and Bylaws with Rules and Regulations. They cannot do this. Rules and Regulations cannot override/change Covenants nor Bylaws.

I say a renter is not an owner thus does not have the rights an owner has. Even with a proxy I say a renters rights would still be limited meaning they could vote as per the proxy but not engage in discussion.

SC does have Title 27 - Property and Conveyances, CHAPTER 31, HORIZONTAL PROPERTY ACT but it applies to apartment style condominiums that share common areas like halls, lobbies, elevators, parking garages, etc. It does not apply to stand alone home nor townhome associations.

One final question. Is your association under owner or declarant control?

Thanks

MaryM34 (South Carolina)
Posts: 10

Posted:

Posted By JohnC46 on 01/19/2013 8:42 AM
Mary

One final question. Is your association under owner or declarant control?

John,
Tough to answer. Depends upon who you ask. We have 3 phases of development in our community. Two are finished and under one HOA. The other phase is a separate HOA and under the Developer's control. When the Developer "turned over" our HOA to the homeowners, the potential Board members sent out a letter stating that we would have a meeting to vote for homeowners to serve on the Board along with the Developer. Now that Board is depositing money from the Developer's HOA into our bank account and showing it as income on our budget sheet. When I questioned this I was told that our BoD is working up a legal agreement for cost sharing with the Developer. It's kind of a big mess if you ask me.

DuaneR (Washington)
Posts: 35

Posted:

Hey John from S.C. - who says big Govn't doesn't create jobs( refer to HOA Law for your state)!

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