Budget Meeting

Started by RichardD • 25 replies • 1441 views

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RichardD (North Carolina)
Posts: 66

Posted:

Here in NC we're a condo assn of 86 patio type individual homes.
The owners assumed the association from the builders in 2006. Since that time
we've had a budget meeting yearly, along with the annual meeting.

This year it was decided to have the budget meeting early. Then the BOD and
management decided that the Board would ratify the Budget and no meeting would
be necessary. I complained to management that we, the owners, have the lawful
right to meet, discuss and question budget items. I lost my case. We are not
having a budget meeting this year.

I would like your input on this matter and below is what our NC law has to say:

Within 30 days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners, and shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 30 days after mailing of the summary. 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 unit owners or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.

LarryB13 (Arizona)
Posts: 4,099

Posted:

I agree with you, Richard. The meeting is a requirement set forth in the statutes, even though it is not likely that a majority of the owners will attend and vote against the budget. As you implied, the meeting is also an opportunity for the board to explain the budget to the owners. It is not just a matter of complying with the law; it is also the difference between secrecy and transparency.

KerryL1 (California)
Posts: 14,550

Posted:

I agree with every point that Larry makes.

DouglasK1 (Florida)
Posts: 2,046

Posted:

The question then is how to enforce. Does the law define any penalties for non-compliance? I don't know if there is an ombudsman or other state office in NC that deals with HOA issue, many or most states don't really have one. This leaves enforcement to the civil courts, i.e., you would have to sue and win to enforce. This is typically an expensive and slow process.

Another longer term solution is to work to get new board members elected (maybe including yourself) who care about transparency and following the law. This could involve campaigning on their behalf to help them win.

Escaped former treasurer and director of a self managed association.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Richard,

The membership would not participate in the process of making the budget. That is the Boards function.
However, based on your citation, the membership must be given an opportunity to reject the budget the Board made.

Have you given the citation to the Board and MC (specifics vs. general)?

If you did, then you may need to have an attorney write a letter on your behalf to the Board, as this should get their attention.

RichardD (North Carolina)
Posts: 66

Posted:

My thanks to all that have responded.
I have taken no action as yet, I mainly wanted to get a consensus from this group of experts
before proceeding.

I'm in total agreement that the Board/Management establishes the proposed budget, but it
must be ratified by the Unit Owners. Don't see any way to misinterpret the NC law that I
copied in my original post. I believe, as Tim posted, that having an attorney clear
up this issue is probably the best way.

Biggest problem in my association is a lack of caring by most of the owners.
The board is constantly refusing to enforce the laws, or selectively enforcing them
and noone seems to give a rat. Sure most of you have had the same problem.
Sorry, I just felt like venting......

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Richard

Rarely does a budget have to be ratified by owners. Typically what happens is the budget is automatically accepted unless a majority of owners vote it down. In our SC association this requires calling a Special Meeting within 30 days of the Budget being presented by the BOD and at this meeting a majority of owners (all owners, not just those present) vote not to approve the budget.

For all practical purposes unless our budget went way out of line (like doubling the dues), I doubt we would ever be able to gather enough people to overturn it.

RichardD (North Carolina)
Posts: 66

Posted:

John
I respect your opinion on this issue and I agree with all you're saying except
your first sentence. Don't know what your SC rules are but I quoted our NC
rules above and unit owners voting to ratify the budget is mandatory. I agree it
would be highly unlikely not to be ratified, but it is still a procedure that
must be followed.

After all voting to approve/disapprove the budget and electing directors
are the only times, generally, unit owners get to vote.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By RichardD on 04/28/2017 5:51 PM

Biggest problem in my association is a lack of caring by most of the owners.
The board is constantly refusing to enforce the laws, or selectively enforcing them
and noone seems to give a rat. Sure most of you have had the same problem.
Sorry, I just felt like venting......

This is known as membership apathy.

Every Association has some level of membership apathy and there is no specific solution in how to fix the issue.

The problem with membership apathy is that an Association Board has no checks and balances (as it's the membership that provides those checks and balances). This can cause larger issues later on.

RichardD (North Carolina)
Posts: 66

Posted:

I totally agree with your assessment Tim. Our association is an over 55 community.
At first I thought the apathy problem was due to the age of some of our members,
but after reading the post in this forum and talking to other assn members in our area,
I guess aging is not the only problem.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Richard

In your original post you said NC law. What do your association docs say?

Some of what you posted:

There shall be no requirement that a quorum be present at the meeting.
This means no has to be there.

The budget is ratified unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration rejects the budget.
This says that a majority of owners would have to attend and vote no. Highly unlikely both would happen based on what you say. This also says if not a majority of the owners are at the meeting then budget is ratified no matter what those in attendance say/vote and I would argue they do not even get to vote unless a majority of owners are present.

RichardD (North Carolina)
Posts: 66

Posted:

The NC law that I posted is the same wording in our condo declaration.

The first sentence of that declaration is very explicit that a meeting
"shall" be called for the purpose of ratification of the budget "by the unit owners"

The next part of the document specifies that at this meeting, a quorum is
not required. That simply means that any number of members present would make it
a legal meeting. If no one shows up then it would not be considered a legal meeting.

Finally, The budget will be considered ratified unless a majority of members
reject it. If rejected the current budget will still be in force until
the board proposes another budget for the membership to ratify.

Even thou there appears to be ambiguity between "no quorum required" and
"ratified unless a majority of unit owners reject it", I believe a meeting
is still required.

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Can you have the budget meeting at the annual meeting?

RichardD (North Carolina)
Posts: 66

Posted:

Jeff
We've had the budget/annual meeting together for the past 10 years.

Current board decided to separate them!!!!!

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Posted By RichardD on 04/30/2017 4:18 PM
Jeff
We've had the budget/annual meeting together for the past 10 years.

Current board decided to separate them!!!!!

Well, not really, they ultimately decided not to even have the budget meeting. So you might want to suggest putting them back together, since it is pretty easy to have a budget meeting at the same time as the annual meeting.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By RichardD on 04/30/2017 4:18 PM
Jeff
We've had the budget/annual meeting together for the past 10 years.

Current board decided to separate them!!!!!

Might be a good idea to get the budget ratified as I expect there would not be a majority of owners attending a Budget Meeting thus not enough (majority of owners) to vote it down.

I expect the Annual Meeting would be attended by more owners than a Budget Meeting thus there could be a chance of enough attending (a majority) the Annual Meeting to vote it down.

Hope I am making myself clear. I am coming down on the side of the BOD being able to get the budget ratified versus it not being disapproved. I see a distinction between the two. Am I the only one seeing this distinction?

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By RichardD on 04/28/2017 11:37 AM
Here in NC we're a condo assn of 86 patio type individual homes.
The owners assumed the association from the builders in 2006. Since that time
we've had a budget meeting yearly, along with the annual meeting.

This year it was decided to have the budget meeting early. Then the BOD and
management decided that the Board would ratify the Budget and no meeting would
be necessary. I complained to management that we, the owners, have the lawful
right to meet, discuss and question budget items. I lost my case. We are not
having a budget meeting this year.

I would like your input on this matter and below is what our NC law has to say:

Within 30 days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners, and shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 30 days after mailing of the summary. 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 unit owners or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.

I agree with what the NC Law states and as others above noted ... per what you posted the BOD ""SHALL" set a date for a meeting of the unit owners to consider ratification of the budget ...". The term "SHALL" is similar to "MUST" and "WILL". In my state potentially if your violate those terms you can end up violating other laws such as statutes of fraud. The question is then ... if the HOA violates the SHALL as noted do they also violate potential any Financial Fraud Statute???

SueW6 (Michigan)
Posts: 814

Posted:

I feel that you are giving too much power to the word "ratify."

That means just to confirm, kind of a last step to acknowledge there is an official document.

That's not the time to bring up objections. That should have been done way before it gets to a meeting where there doesn't even have to be a quorum. In other words, it's a formality.

Is there a Finance Committee? Were there budget meetings that you could have attended and made your input at that time?

What specifically do you object to in the budget?

RichardD (North Carolina)
Posts: 66

Posted:

My main concern in starting this thread was to get the opinion of several professionals on this forum
as to whether or not it was illegal to not have a budget meeting (knowing the NC law & our Declaration).
I realize it requires a lot of no’s to kill a budget, but at the same time I believe the proper steps should
still be followed. I really appreciate all the input and I believe I have gained some valuable knowledge.

In answer to Sue, I have no objections to the proposed budget, in fact, I went to the called meeting to
vote for it. I do object to the board and management cancelling the meeting by saying it was not
necessary. Maybe the meeting is not the time to bring up discussions about the budget,
but that’s what we’ve always done and frankly I don’t see anything wrong with that concept.
We do not have a finance committee.

John your sentence “ I am coming down on the side of the BOD being able to get the budget
ratified versus it not being disapproved.” is a little vague to me. Seems they are one and the same.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

John your sentence “ I am coming down on the side of the BOD being able to get the budget
ratified versus it not being disapproved.” is a little vague to me. Seems they are one and the same.

While I agree the meeting must be held, one has to look at all the contingencies to have their bases properly covered. I see it as two issues:

Let us say 100 owners.

One: If 50 or less owners show up at the Budget Meeting it is automatically ratified even if those 50 scream and howl about it, they cannot disapprove it as they are not a majority of the owners. It will be ratified.

Two: It can only be disapproved by a majority of owners voting it down. This means at least 51 of the owners would have to show up at the meeting and all 51 would have to vote to disapprove it.

RichardD (North Carolina)
Posts: 66

Posted:

John
I have to admit your logic makes sense. As I alluded to in an earlier post, there seems to be
ambiguity in the wording of this NC Law.

As,in your example, it takes a majority (51 or more) to kill the budget, but a meeting only
requires (50 or less) to attend, whats the purpose? It appears to be a flawed NC Law.

Thanks for not giving up on me. Sometimes (no most of the time) I'm a bit hard headed....

JohnC46 (South Carolina)
Posts: 14,265

Posted:

ichard

It was probably added just a way to make all feel good. I can assure you some think it means they can turn the budget down or modify it even if only a few of them show up. Amazing how things get misconstrued.

As an example. Our BOD can raise the dues by any amount simply by presenting the new budget (mailing it out counts) on or before December 1st. The owners then have 30 days to call a Special Meeting where a majority of owners (57 of 112) can vote it down. It is not a majority of the 57 saying no, but 57 or more saying no. If such happens, then there is an automatic 5% dues increase.

The majority of our owners believe the BOD cannot raise the dues by more than 5% per year. One reason for this was the Declarant's Sale Agent erroneously told perspective buyers this. As we took over from the Declarant, I pointed it out to her. She said I was wrong. A few months later she bought a home here. I got a call from her apologizing because when she bought her house, she asked her lawyer about dues increase and he told her I was right.

We have had the same dues for 8 years. I was on the Declarant Appointed BOD during the transition. I was also on our 1st owner BOD. Come election time, I had made it clear I was for a dues increase. I even referenced it when I spoke at our candidate night presentations. I finished 6th (by two votes) in a 5 person race.......LOL

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By JohnC46 on 05/01/2017 6:55 AM
John your sentence “ I am coming down on the side of the BOD being able to get the budget
ratified versus it not being disapproved.” is a little vague to me. Seems they are one and the same.

While I agree the meeting must be held, one has to look at all the contingencies to have their bases properly covered. I see it as two issues:

Let us say 100 owners.

One: If 50 or less owners show up at the Budget Meeting it is automatically ratified even if those 50 scream and howl about it, they cannot disapprove it as they are not a majority of the owners. It will be ratified.

Two: It can only be disapproved by a majority of owners voting it down. This means at least 51 of the owners would have to show up at the meeting and all 51 would have to vote to disapprove it.

YEP ... Agree would be ratified unless majority of members disagree (as long as legally called meeting following documents and State Laws). The OP in original post is stating the BOD is essentially wanting to skip the meeting or stating not necessary. LOL ... Their bad ...

RichardD (North Carolina)
Posts: 66

Posted:

I have one final question before we turn this issue out to pasture.

Considering the NC law and our Declaration that was listed in my first post,
would a failure of the board to call a meeting to ratify this budget be
grounds to say the new budget was illegal?

Again thanks to all for their participation on this issue.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Once could certainly make the argument that the new budget wasn't valid.
Of course that argument would need to be made in court (money, time, energy).
By the time the case is heard, the issue could be mute (other then for principal).

It's been about two weeks since you indicated that you took no action about this yet.

Have you brought any of the suggestions you received to the board (or took any other action)?

RichardD (North Carolina)
Posts: 66

Posted:

Tim, thanks for your response.
I have taken this up with Board and management. They believe they
have the right to make and approve the budget, regardless of what the
laws are.
I support the proposed budget and agree with you that its probably not
worth the time, money, etc to go to court.

My concern is that its a breech of our laws and our current board is breaking
them left and right. No one else seems to care.

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