Former Board Members and...

ReneeD (Illinois)
Posts: 201

Posted:

Can former Board Members still be held liable for duties they were not aware at the time, including one is still is on the Board?
In all the years I've lived here, the only information homeowners have received, usually in November of every year, was a copy of the proposed annual budget---SEE (a) and (1) below along with a letter stating whether there would be an increase or not. Shouldn't all homeowners have received Item # 3 (in large caps) below as well? And, how exactly is Item # 4 calculated? [BTW, our annual meetings are held in August---shouldn't homeowners be given a chance to discuss Annual Budget information with the BOD as well so that input can be given/voted on at that time?] Who is not acting in the best interests (fiduciary duties)? the BOD or our full-service Management Company?

Following is what I have found in both our Declarations and Bylaws recently posted to our new website...

(a) Each year on or before December 1, the Board shall adopt subject to the provisions of Subsection (b) and furnish each Owner with a budget for the ensuing calendar year, which shall show the following with reasonable explanations and itemizations:
(1) The estimated Community Expenses;
(2) The estimated amount, if any, to maintain adequate reserves for Community Expenses including, without limitation, amounts to maintain the Capital Reserve;
(3) THE ESTIMATED NET AVAILABLE CASH RECEIPTS FROM THE OEPRATION AND USE OF THE COMMUNITY AREA, PLUS ESTIMATED EXCESS FUNDS, IF ANY, FROM THE CURRENT YEAR'S ASSESSMENTS;
(4) The amount of the “Community Assessment” payable by the Owners, which is hereby defined as the amount determined in (1) above, plus the amount determined in (2) above, minus the amount determined in (3) above;
(5) That portion of the Community Assessment which shall be payable each month by the Owner of each Dwelling Unit which is subject to assessment hereunder, which shall be equal to one-twelfth of the Community Assessment divided by the number of Dwelling Units, so that each Owner shall pay equal Community Assessments.

Anything in this Section to the contrary notwithstanding, during the Initial Development Period the assessmesnt procedure set forth in Section 6.08 shall apply and the budget provided for in this Section need not disclose the information called for in Subsection (5) above, although the budget shall disclose the portion of each Owner’s share of the Community Assessment which shall be added to the Capital Reserve.
(b) No budget may be adopted with respect to a calendar year commencing after the end of the Initial Development Period which would require the Owner of a Dwelling Unit to pay a monthly assessment which increases more than the percentage increase in the Index (defined in Section 6.08(b) below) during the most recent ascertainable twelve-month period prior to the adoption of the budget, unless the budget is affirmatively approved by at least two-thirds (2/3) of the members of the Board then serving.

I also found the following in our Bylaws are in agreement with above and basically state "...that homeowners should be given an itemized accounting of the Community Expenses for such fiscal year actually incurred and paid, together with a tabulation of the amounts collected pursuant to the Annual Assessment budget, and showing the net excess or deficit of income over expenditures plus reserves."

Thanks. -ReneeD

RosinaD (California)
Posts: 8

Posted:

I can try to explain what your assessments are based on, but whether or not the owners are entitled to input on the budget depends on what the laws in your state say. In California, the budget meeting is an open session meeting.
Basically what they are telling you is that they look at last years budget and come up with a figure which represents what was actually spent last year for utilities and maintenance.
Then they add to that the amount that is needed to keep major components in good repair. A reserve study is probably done to determine how much money would be needed to pay for large capital expenses like a roof or swimming pool. Usually the amount for keeping up major components is spread out and a separate account called a reserve account is set up. So much money has to be put in this account every year.

So far we have the funds needed for operating expenses plus funds needed for reserve account.
Then they subtract whatever is brought in from the operation and use of your community area and the assessments. You must have some kind of community area that brings in an income. (laundry room or some fee or rent charged on a recreational area)

If they break even on these calculations, no more money has to be collected. If they don't then they divide the balance by the # of units in your development to figure out what the increase in dues would be if you are all assessed the same amount.
The budget that is sent out to you in November should include all of this information, and depending on the state that you are in, you may be entitled to attend the budget meeting. Check your HOA laws and complain to the management company if you are not getting all of the information.
A full service management company would be advising your board on how to budget and would be responsible for getting this information out to your membership.
'Hope this helps.