Observer for assessment voting in Texas

In Texas, can HOA member be an observer to special voting on assessment increase?

HOA Board wants to increase annual assessment dues to build reserve. Property Management company has vocally supported the increase for building reserve.

Some HOA members are against it as we noticed that by eliminating certain unnecessary expenses, we can build reserves without increase. Hence the voting on the assessment increase.

Until now, only Property Management company has been acting as de-facto "inspector of elections" as none has been defined in CCRs. They have not allowed members access to votes stating privacy. But now with their known vocal stance of supporting the increase, how do we verify that tabulation of votes will be impartial? Can a member become an observer to ensure fairness? What can observer do with regards to mail in ballots and proxies?

How much is the annual assessment increase?

What percentage of your annual budget?

How much is the base amount the 20% applies to?

Does 100% go to the Reserve Fund?

How underfunded is the Reserve Fund?

How long will it take to reach 100% Reserve Fund level with and without the 20% given the no increase side wins?

Thanks KerryL1.

The CC&Rs and ByLaws does not state anything about inspector of elections or observers or who will tabulate, etc.

I am trying to find out what Texas state laws/statues say about this, but the only thing I found was in chapter 209 of the property laws.
209.00594 states that only a person qualified to tabulate votes in a property owners’ association election may be given access to the ballots.



That sounds more like members who vote cannot tabulate those votes. That part is understandable. But what about being observer to ensure fairness? Or spouse of member who votes?

The 20% equates to the amount that will go into reserve fund.
Presently there is zero reserve fund.

If we eliminate certain expenses like replacing flower plants multiple times a year, we will save more than that 20%. So our take is to eliminate those expenses and use those funds for reserve funds. This way, we will not need any increase and yet build our reser funds.

The question is, are you just applying a band aid fix? Without a Reserve Study to work with will your proposal work for the next 5-10 years?

Hold your horses. You may think that replacing flowers is "unnecessary" but maybe not. The HOA's responsibility to keep the HOA property ATTRACTIVE to potential buyers. So fresh and lively flowers at an entrance/common area makes the HOA look good.

Now why the need for a reserve fund all of a sudden? Is there some capital equipment that needs funded/maintained? Is your HOA responsible for let's say roof replacements? Do you have a clubhouse, a pool, or other amenity?

A HOA doesn't necessarily need a "reserve" account. It's a Non-profit corporation but not a charitable one. A Reserve account is different than a "savings" account. They could have different tax ramifications. A savings account could be for emergency expenses but not long term capital replacement/maintenance.

Don't want to see you all raise 20% of dues just because you think you need a reserve/savings account. It may be a special assessment situation instead. Many HOA boards can raise dues around 5% each year. Anything above that is subject to a majority of owners vote.

If I had to make some assumptions here is what they would be.

1) This is a newer Development that may or may not be still under developer control.
2) If the first is true then your initial board has very little power as the declarant gets most of the voting power.
3) Usually new developments have more money in operating accounts if they are not setting up a reserve account.
4) Got to get the Study done so that a reserve number is not just a guess.

Regarding the Election being from Ca. we always had people that wanted to be able to supervise the opening of the ballots. They were never in charge of counting but could watch the process. I have only been around 2 elections in Tx and had very little interest or hot topics on ballots. I was actually shocked that I got elected when I was a total newby with lots of experience.

Most HOAs have limits on how much dues can be increased without a vote of the majority. A 20% increase is a tuff pill to swallow. Usually boards tend to take the easier route and go with 9.5% per year so that they can do it without getting votes from people that only care about tomorrow. Reserves are very important and should always be a serious concern.

Very true, 5% is a reasonable increase. We do have some reserve funds already in account, its not that we ran out of reserve funds.

It is also true that making common areas attractive is necessary, but question is, to what extent? Has there been a study conducted to see where we can save money? According to Board, answer is "No, that has not been done yet". So vote is to force Board to first stop the increase, then study the expenses and justify what expenses are really needed and if it can be eliminated or reduced. After the study and exchange of ideas with members, it might very well result in yes increase is warranted. Our take is, do not increase blindly.

Our community does not have any ammenities other than a small playground for small kids. The boundary fence (its not gated community) around the community perimeter along with landscape maintanencehas been mutually agreed (by all members) to be maintained by HOA. By increasing dues, we will be one of the few communities with high HOA dues and other communities with lower dues have more common ammenities. Vote is only to ensure there will be a study to reduce expenses before we think of increasing dues.

Again, we are deviating from focus of question - having observer for vote tabulation.

Thanks Mark. Good valid points. Our position is point #4 you state. Board has already told us that they have not conducted any study on where expenses could be curtailed. Hence we want them to stop increase, analyze the expenses and have a HOA meeting to discuss where expenses can be reduced. Then look at the question of if increase is warranted and then if yes, up to what extent.

Right now it is a blind increase to "build reserve" with no defined limit of what the ideal reserve limit should be, where are we with regards to that goal and justification for that reserve limit.

MarkM, Henry, in #4 is advising that your HOA have a "reserve study" done. This is conducted by a certified reserve analyst.

Meanwhile, I feel that there must be mire TX statutes concerning elections, vote counting, etc. Maybe MarkM knows something about them?

George

W=Have any words of wisdom on getting a reserve study authorized if you're NOT on the Board? Again, as the OP stated on a couple of occasion, the RS is not the topic.

It makes sense to have an observer, and I don't see why the board would object to that. I find nothing brings out homeowners more than the news of a fee increase - and a 20% jump does seem high. Funny business with the voting on this type of issue usually doesn't end well, so I really don't think that will be the problem. If anything, the board should want to have an independent observer (or two or three) to ensure the voting is fair.

All of that said, I also agree that the real issue is whether your community has a reserve fund that's being funded properly. If some of you really think this increase isn't necessary or hasn't been completely thought out, it's best to show up at that meeting and make your case as strongly as you can. At the very least, push for the 5% increase (you'll probably need it just to keep inflation at bay), but you should also be pushing for a reserve study so the board can make educated decisions instead of tossing out a 10% or 20% jump in the budget.

You and the other homeowners also need to read the study because I'm not sure that not planting flowers and things like that will be enough to avoid an increase. Especially since you haven't said what areas the association is responsible for, how old the community is, when was your last assessment increase, if you've ever had a reserve study or when was the last time that was done, etc., etc. I understand and agree with your concern for a fair vote, but don't get so caught up in that area that you don't look for the story behind the vote in the first place. Get out and walk around your community and encourage everyone to show up - if you win the day, fine.

Henry

To clarify. Typically owners do not get to vote on a Yearly Assessment (Dues) increase. The BOD can do such on their own. Some have limits to the amount of increase, some do not.

Typically owners vote for and must approve a one time Special Assessment and generally it must be a lager % (typically 2/3rds) of all members approving.

Many BOD's appoint their PM to oversee the vote counting along with a Member of the BOD. I have seen a BOD randomly pick an owner to also oversee the voting.

Above varies, but typically this is the way it happens.

I have seen a local Minister oversee vote counting for a donation to his church's building fund..

Old thread?

Henry, has your association adopted rules to allow voting by secret ballot?

Thanks for all of your help and guidance.
Sorry for delayed response. So here are where things stand as of now.

Background:
PM conducted reserve fund study who suggested an amount of reserves to hold in next 30 years. The study did not cover where money can be saved. In order to fund the reserves, PM & HOA Board decided to increase the HOA Dues by 20%. After working with the other HOA members, we forced a special ballot for voting against 20% increase as I believed we can lower landscaping costs to save us money. I was concerned about the vote tabulation by PM as PM was visibly and in emails upset when questioned about details of the proposed increase and landscaping costs.

Voting (Secret Ballot was not approved):

1. Observer for vote tabulation was allowed.

2. On day of vote, the Property Manager (PM) started by saying that Reserve Fund is necessary (no HOA member opposes that point). PM also said that they landscaping costs listed in the books show a negotiated lower amount ($45K from previous $54K), thus PM worked in the interest of the HOA members to save us money. Then the floor was opened for questions by members directed to Board. Board was unable to provide satisfactory answers to basic questions:
a) What work does the landscaper contract exactly cover (mowing, fertilizer, pest control, irrigation, changing of flowers every season, replacing dead plants, etc)? - We do not know what exactly is covered, we can get back to you later.
b) Were other landscapers reached out to, to see if they can provide a lower quote? - No we did not.
c) Did you try to renegotiate the contract with the landscaper? - No we did not.
d) Did you conduct a study to see where HOA can save money? - No we did not.

Vote was conducted and members rejected the increase.

About two months after the vote, the HOA Board informed us that they renegotiated the rates with landscaper and the costs have fallen well below the increase to fund reserves. In other words, fallen by 33% (new amount $30K). Thus, with this new lower landscaping costs, no increase of HOA dues are needed for reserves. The existing HOA dues will add same amount of reserves by end of year as was planned with the increase.

If we had not opposed the increase, we would have been paying landscaper more for the same work and HOA members would have had to pay more in HOA dues.

A member can be an observer but I'm not aware of anything in Texas law that entitles you to have an observer. Only candidates are entitled to have an observer view the counting of ballots.

I don't think it's an unreasonable request, though. There shouldn't be a privacy issue. In the case of a candidate having an observer, they are not allowed to view the names on the ballots. You could have the same rule in this case.

I would make the request to the board, not the manager.

Henry,

Congratulations on the work you accomplished.

Thank you for the update. It's nice to hear what happens in situations after the OP has considered the opinions and took (or chose not to take) action to address their issue.

Great story to show that a little bit of effort can have major changes occur.

Tim