Owner approval of special assessments and annual budgets

Our bylaws (written in the 70s) have the board being the sole approver of the annual budget along with the assessments required. Special assessments require board approval as well.
Sometime in the past couple decades, a board decided to ignore the bylaws and put budget approval to a membership vote in the annual membership meeting.

I have just been chosen to replace our board member who resigned and my major push for the rest of this term is to get our governing docs rewritten, so I will be following this topic with great interest.

As per our docs, the BOD can raise the yearly assessment (dues) by whatever amount it wants to raise it. There is a procedure they must follow but any increase is the BOD's decision alone. Owners do not get to approve the amount. There is a lengthy procedure where 51% or more of all owners (I repeat, all owners) at a Special Meeting, could turn an increase down. Fat chance of ever getting that amount of owners at a Special Meeting.

A Special Assessment would require 2/3rds of all owners (I repeat, all owners) approving of such.

When we have a BOD (5 members) vacancy (resignation, death, relocations, etc.), the BOD (with a BOD majority vote) can fill the vacancy. If one is appointed by the BOD, they fill out the remainder of term of who they are replacing. Our BOD terms are 2 years long. The BOD can also wait until the next Annual Meeting/Election and have the owners elect who fills the vacancy. Thus we have two ways of filling a BOD vacancy. As we have an MC, we can easily operate with a 3 person BOD and we have done such in the past.

I am satisfied with the way we operate. It takes 66% of all owners (I repeat, all owners) to change a Covenant and 51% of all owners (I repeat, all owners) to change a Bylaw. I believe those amounts are high enough to prevent a rogue faction from making changes.

You may ask yourself: Why does he keep repeating (I repeat, all owners)? The reason is many think it is only a % of those there, voting, etc. to change something when it requires a % of all owners (I repeat, all owners) agreeing.

As far as Proxies go, the latest dated Proxy is the one that counts and anyone can collect Proxies. The BOD could have a Proxy from Mary Smith dated 01/01 but if I show up with her (new, changed) Proxy dated 01/02, the one I hold prevails. Yes it would take some work on my part to "beat" the BOD, but it can be done.

Our association's annual budget is approved by the board. If next year's assessment exceeds the current by 5% or more, then the homeowners have to approve the annual budget. Owners do approve special assessments - I think 75% or more is required.

This has worked well for our community, and I admit I'm probably biased because I served for 10 years, 5 as treasurer and we worked hard to keep homeowners informed about the budget. For us and most responsible HOA boards, that's what's supposed to happen - effective HOA management requires transparency, and I, for one, would have a problem with a HOA board not having some sort of check against an assessment increase just because it's Tuesday and they can. Setting a budget decision is what HOA boards do, along with keeping homeowners informed. Unfortunately, apathy is a huge problem with HOAs and most people only think of an assessment's effect on their own household budget. If the homeowners were able to approve the budget, it would probably get shot down if the assessment increased by even a quarter because it's "too high." I don't like paying more either, but I also know that today's dollars may not be enough two or five or 10 years from now (inflation and all that). Instead, people think they'll be long gone by the time the caca hits the fan.

That's often why special assessments come into play - they should be rare, but too often, they become necessary because previous boards didn't fund the association properly, like establish and maintain a reserve fund, and were more interested in getting elected and re-elected. If you don't have enough money in the annual budget or reserves, but you have no choice but to do the work because it's been put off far too long, the current board (and possibly new homeowners who didn't have anything to do with the bad decision making of the past) have to deal with the fallout.

Now as far as vacancies and proxies go, I find it odd that your association hasn't had an elected board in "ages." You don't say how big your community is, but simple math would dictate if you have a community of, say, 100, with a 7 person board, the remaining 93 should be more than enough to vote out the current bunch and put in folks who will act in a responsible manner. In our community, the board fills vacancies, but that spot comes up for election in the next annual meeting, so someone else could run for that spot. Election campaigns usually include talking to the other homeowners about attending the meeting to cast a vote or at least collecting their proxy so you can cast it on their behalf. Your board is doing it, but that shouldn't stop someone else from doing the same thing to vote them out. You might want to check your documents to see how proxies are supposed to be used - if they're not being used properly, all of the homeowners need to show up to actually cast the vote themselves. Such is politics, whether you're on a school board or a HOA board.

Finally, HOA 1 doesn't have to be run like HOA 2. Any HOA is as good or bad as the homeowners in it - I believe someone else made that point on another conversation on this board, and it's true. If the same people have been on your board for years and years, maybe it's because they're actually good at what they do - or not enough people have called them on their BS. If you want a change, it's time for you to go out and start talking to your neighbors.

AugustinD, thanks. The meeting materials that the property manager circulated don’t have any information about the meeting or the board on them, other than the annual meeting’s time/place/location (a conference room that fits about 10 people, miles away and inconvenient for people to go to). The meeting materials and proxies don’t even list the board members’ or candidates’ names. The proxy just says that it appoints the board president to do whatever the board president wants. There is very little transparency.

Do owners could go out of their way to a meeting far away and find out what’s going on, but the system is designed to reduce owner involvement and transparency. It’s like a North Korea election: perhaps in theory it could be a true democratic one, but in practice it isn’t.

Standard disclaimer: I check the authors' names on posts, on the left-hand side of the screen, before reading them. I ignore everything that MelissaP1 says.

I'll let everyone know how this item works out--if other owners care. They might not.

BarbaraT1, good point. Thanks.

It's not strange, it's different.

Homeowners exercise their rights through election of the board.

The board HAS a quorum if they have enough proxies. The board appoints members to fill vacant seats if there is no interest in running for the board.

This means homeowners as a whole feel that everything is fine, or at least fine enough.

Like in the US as a whole, you are not REQUIRED to exercise your right to participate in the process.

In my HOA budgets are enacted by the Board of Directors at its sole discretion. The same for any special assessments.

As an owner I don't want the ability to interfere in the budget process. Actually I wouldn't mind, myself, but I wouldn't want my wacky neighbors to have a say. Most of them haven't the first idea of what it takes to run the place. If the homeowners here had a say like that then there would be no reserves whatsoever. For years the board has kicked the maintenance ball down the road with "we'll do that when we have the money" excuse. That's bad enough. With the homeowners' fingers in the budget pie the place would self-destruct due to neglected maintenance.

My community has multiple HOA boards and they operate under both budgetary approval provisions.

The Condo HOA can approve budgets and special assessments without direct input from owners. This works because the condos have a high level of shared building maintenance and more pressing emergencies.

Our Master Association covers the pool, clubhouse and grass park. Master association emergencies, while bad or inconvenient, aren't affecting a person's immediate housing. The master association approves budgets, but dues increases can only track the U.S. Inflation Rate and 100% of special assessments require owner approval (any assessment that requires the use of common property elements as loan collateral). The master association provides the "fun" amenities and needs a nice, tight financial leash.

After seeing both policies in action, I agree w/ both them given the board operations and expectations.

You have just described a typical ratification process. If 51% of owners don't disapprove, then the budget is ratified. Percentages may vary. More often the ratification process occurs at an annual meeting rather than a special meeting.

In the 30 years I've lived in my HOA, budgets have always been ratified. Many homeowners think that their votes count toward something - but in reality, the vote of the Board to approve the budget winds up being the only vote that actually count.

Thanks again. I'm guessing that the procedure in JohnC46's posts is required by law.

I'm stepping back from proposing changes in my own HOA.

For the record, my real name is NOT John.

The proper procedure is in our Covenants so that is what we followed.

For the record, my real name is John.....LOL

Everyone's anonymous to a certain degree so who cares if your name's John, James or Tyrone???

If the process really concerns you, that shouldn’t stop you from asking questions or even proposing alternatives. AugustineD is right when he said some boards continue to do whatever they want because no one has the guts and/or takes the time to challenge them. You also said you didn’t want to stir things up, especially if most of your neighbors might disagree with you – how do you know they won’t. Maybe you should try to talk to some of them – you may find some agree with you there should be more transparency and perhaps some new blood on the board itself. That’s how change begins – won’t happen overnight and it won’t be easy, but a lot of us on this board started the change in their community because they wondered some of the same things you did. By the way, change can also include your documents, although changing them could take a little more drama, especially if you have a ton of apathy.

Remember what Frederick Douglas said about power - Power concedes nothing without demand – it never has and it never will. So the next move is yours. At the very least, talking to your neighbors may lead to everyone attending the next board meeting – if all of you have to cram inside that conference room, so be it, or send one or two representatives to report back. Working together might prompt your board to be more forthcoming in explaining budget decisions. Regardless of who approves it, you have a right to know careful thought is being applied and people aren’t pulling numbers out of their behind – you won’t know for certain until you stop guessing.

I can count on one hand all the budgets given to Board over 10 years that actually did ANYTHING with them.

but typical

The procedure is in our Covenants which to me are stronger than the law as each owner agreed to abide by the Covenants.

The law means absolutely nothing to me any longer. Why should it, it doesn't matter to the clown living at 1600 Pennsylvania Avenue.

What law SPECIFICALLY has been violated ?

Unless the Army Corps of Engineers objects to the draining of the swamp.

The permit for said draining was the 'will of the people'.

Richard: If you don't like it here, moooove.

Bon Voyage

..... sound of door slamming, hopefully

... yes, you may mot have the last word ...

If I remember correctly from the hours I studied condo law and our documents, Condominiums built in Ne after Jan 1984 must have member ratify any budget the Board presents. Ours was established in 1981 so this is not a requirement for our association.