Proposed Budget vs Approved Budget

At our HOA meeting, the proposed budget was approved by the majority of the owners. In that budget, there is a statement about how the docks will be assessed. Now when owners look at the "approved budget" that is online, the statement about dock assessments is different. Owners are upset that this was changed after voters approved the budget, and the new assessment of docks is not what was presented in the proposed budget. How should our board handle this?

* The docks are a common element, but on the dock are boat slips, that owners purchased. Not everyone has a boat slip.
So some on our Board do not feel the non-slip owners should pay the same for the docks (common element).
I reminded other board members we got a legal opinion about this and the opinion stated the docks are a common element per our declarations, and that everyone pays according to their percentage of interest.
The board changed the budget to have the non-slip owners pay less than slip owners for the dock assessment.

Owners feel this was dishonest and maybe illegal. We stated in our budget what the cost would be, but in the end the approved budget is different and most owners are paying more than what was proposed at the meeting.

How should we go about fixing this? I don't think owners are going to sit still for how and why this happened. So now the board says they will get a new legal opinion on this issue. The other legal opinion was 4 years ago and nothing has changed in regards to declarations and bylaws.

Post-o. Change the first paragraph of the proposed letter to read as follows:

On ___, the membership approved a budget that assessed owners on the basis of their percent interest. This is consistent with the HOA's Declaration and therefore is lawful. A few years ago an attorney opined the same. Yet after the annual meeting, the Board changed the budget and indicated that now, owners would be required to pay assessments inconsistent with the Declaration. We believe this action, of requiring owners to pay assessments that are not as indicated in the Declaration, is unlawful.

Thank you for your responses. There is a group of owners that are drafting a letter, so I appreciate the suggestions on the letter.
Some things I should have mentioned: (my first time in this forum, so initially I thought this should be another topic), but maybe not.

There are 3 Board members. None of the three have boat slips, so it is a definite advantage for them the way they changed the proposed dock assessment portion of the budget. What the board did (against the declarations) was to charge boat slip owners per square footage of the boat slip. Then non-slip owners pay a dock contribution, and this is also paid by slip owners. In summary, non-slip owners are paying 6% of the total dock expenses.

At our meeting it was discussed that their would be a special assessment on much needed dock repairs. The board was not quite sure how owners were going to be assessed for this, questions were asked and answers were vague. The PM stated that state statute (Missouri) calls for payment to be determined according to square footage of the docks, and so the board would have to figure out how to handle the non-slip owners. I intend to look at statutes for accuracy of this statement.

The board did figure out how to handle the Special Assessment, in their Board meeting, just minutes after the HOA meeting, and owners received notice by mail 5 days later.

Every owner is paying a base amount, which is 20% of expenses. The rest is being paid by slip-owners per the square footage of their boat slip. I questioned the special assessment, in an email to the board. They basically said they did not want owners mad at them, so did not discuss what owners would pay during the meeting. It is likely they determined the amounts with guidance from the Property Management Company.

So the board is now saying to owners, (I just learned this) that they don't know what the 2021 dock assessment is going to look like (who is going to pay what) because they are waiting on a new "legal opinion." Yet on our website, the "Approved Budget" is inconsistent with what was approved at the meeting- they have not removed that from our website, so in my opinion all we have to go on in 2021 is what is posted as the approved budget.

It has been suggested to the board by owners, that the Special Assessment cannot charge owners differently, as per the declarations and percentage of interest. The special assessment is due Oct 1st. I think the letter to the board is also going to say owners are not going to pay until there is a special meeting, special assessments and future assessments are allocated per the declaration. The board does have the power to charge a special assessment, but again they are not charging consistent with the declarations. Seems this legal opinion they are waiting on for the 2021 dock issue would also be needed to determine owners payment for the special assessment on the docks. Am I correct in my logic?

I personally contacted the board (by email), as have others about a special meeting. At this time they refuse. Maybe one letter, signed by many owners will help them change their mind.

* The board attempted to use another association's legal opinion (one that had a similar issue with expenses on docks), but not really the same as our complex at all. I got a copy of it, from the management company. I questioned the board how they could apply it to our dock situation (especially when the basis of it referred to the other associations declarations and bylaws)! At that point they said they would get our own legal opinion. Then I shared the legal opinion from 2016. They don't want to use that opinion, I would guess because it does not fit their agenda.

I do not want to be charged late fees or interest for not paying the Special Assessment on time. I am tempted to pay the amount that it should be based on what the declarations say, not on what the board has determined my fee to be.
Is this the reasonable thing to do?

I will update with how this turns out.

This situation happened so fast and so much has occurred, I feel my information may be convoluted. My apologies.

If the OP's community is a condominium, then the section of the Missouri Condo statute excerpted below may justify some (maybe all) of the board's actions. In particular note this statement from the statute: "3. To the extent required by the declaration: ...   (2) Any common expense, or portion thereof, benefitting fewer than all of the units shall be assessed exclusively against the units benefitted;"

=== From the Missouri Condo Statute ===
448.3-115. Assessments for common expenses. — 1. Until the association makes a common expense assessment, the declarant shall pay all the common expenses. After any assessment has been made by the association, assessments thereafter shall be made at least annually and shall be based on a budget adopted at least annually by the association.

  2. Except for assessments under subsections 3 and 4 of this section, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to subsection 1 of section 448.2-107. Any past due common expense assessment or installment thereof shall bear interest at the rate established by the association not exceeding eighteen percent per year.

  3. To the extent required by the declaration:

  (1) Any common expense associated with the maintenance, repair, or replacement of a limited common element shall be assessed against the units to which that limited common element is assigned, equally, or in any other proportion that the declaration provides;

  (2) Any common expense, or portion thereof, benefitting fewer than all of the units shall be assessed exclusively against the units benefitted; and

  (3) The costs of insurance shall be assessed in proportion to risk and the costs of utilities shall be assessed in proportion to usage.

  4. Assessments to pay a judgment against the association shall be made only against the units in the condominium at the time the judgment was entered, in proportion to their common expense liabilities.

  5. If any common expense is caused by the misconduct of any unit owner, the association may assess that expense exclusively against his unit.

  6. If common expense liabilities are reallocated, common expense assessments and any installment thereof not yet due shall be recalculated in accordance with the reallocated common expense liabilities.

=== End Excerpt ===

https://revisor.mo.gov/main/OneSection.aspx?section=448.3-115&bid=24931&hl=

-- TerriM8, thank you for posting the legal opinion. This helps a lot.

-- For now, one question: Is there anything in your declaration that says the costs of maintenance of common elements, that only benefit certain units, can be assigned to the owners of these units? I have seen wording like the latter in other condos' declarations. I am betting the 2016 attorney found there is not, but I do want to double check this.

-- I am glad to see that both the 2016 attorney and I homed in on the same section of the Uniform Condo Act: 448.3-115 and especially Section 3 of 448.3-115. I am not an attorney. Still I read these types of statutes a lot. I find Section 2 and Section 3 of 448.3-115 a bit confusing. They seem redundant to the well-established law on covenants. Maybe 448.3-115 is just to re-inforce the notion that covenants, as given in the Declaration, are to be respected by the courts and all?

-- Unfortunately I think there's an outside chance that some attorney looking to line his/her wallet will side with the board, claiming that "to the extent required by the declaration" can be construed so that the 2020 board is justified in divyving up the assessment in a way different than what the Declaration says. Is that a stretch? A court looks to the plain meaning of the words of a statute first. But interpretation is a huge, enormous topic.

-- I find zero support for the manager's contention that state statute says to use square footage et cetera. Many Property Managers have a high school diploma at best. Your PM may be basing his contention on some truly weird (and legally unacceptable) reading of the Missouri Condo statute. (If I am wrong on this, I will be the first to admit it. But in my experience, it is quite rare for condo/hoa statutes and nonprofit corporation statutes to speak about square footage as a determinant of a part or all of the assessment. The statutes tend to be more generalized in their language and frequently, explicitly defer to the Declaration or Bylaws.)

-- As I think you know, how 'just' or 'unjust' owners feel the Declaration is does not matter. The courts view the terms of HOA/condo declarations as terms of a contract. These are terms to which all agreed when they bought a condo unit. The terms are enforceable to the extent that contract/covenant law allow. Covenants (the Declaration) are the law. If enough people feel strongly that the Declaration should be amended, then they can gather support to complete a formal amendment, per the procedures for amending that the Declaration gives, and where supported by state law.

Thank you. I have reviewed the pertinent section of the Condo Act afresh. I come down squarely on the side of the 2016 attorney. I do figure the statute is merely buttressing what the declaration's covenants say. Perhaps there were some lawsuits arguing xyz in other condos' covenants was unfair, and the Missouri legislature wanted to bolster the power of condo covenants, way back when. As in 'the covenants are what they are when it comes to assessments. We in the legislature do not want anymore stupid lawsuits where owners say that, for example covenants requiring non-slip owners to pay for the maintenance of slips is patently unfair. For criminy's sake, owners, before purchase, knew the terms of owning in the condo in advance."

The Missouri Condo Act appears to date to 1983. Maybe things were getting out of hand around, say, the Lake of the Ozarks and too much litigation was coming up? Lobbying forces did their job?

Right now I think it's less likely that the attorney will side with the board. If it were before 1983 and so before the Condo Act became law, maybe the attorney could argue that the covenants are patently unfair. At times courts will throw out covenants they feel are patently unfair. I am not seeing this here, especially with the statute.

For what it is worth, for one, owners have a statutory right to review condo records, under the Missouri Condo statute and probably also under Missouri's Nonprofit Corporation statute. The invoices from this attorney are included in the records. In short, owners have a legal right to know who the attorney is.

I do feel the owners sending a letter sooner rather than later will help their cause. It will let the new attorney know they know the law on this and give an inkling to the new attorney and board that there will be legal action if the board does not behave. If this new attorney is worth anything, he will see the letter and take this matter seriously, so as to avoid litigation.

I think that, somehow, the PM needs to be reminded it is unfair to change the terms of a contract (the covenants in this case) after all agreed to the terms (upon buying into the condo). Furthermore, the Missouri Condo statute is clear on this point.

I have not addressed the changing-of-the-budget issue to any great extent. There might be serious legal issues with it as well.

If we are lucky, some of the other HOA/condo veterans here will read the excerpt from the Missouri Condo Act and offer their opinion on whether the 2016 attorney's interpretation is clearly correct.

Terri

One thing about Special Meetings. The purpose of such has to be clearly defined. It cannot be a bytching session. In your case it would have to be confined to the equal share of dock costs, assuming I understand the issue.

Also any Amendments made must follow yours docs as to amount of owners needed to approve. It cannot be just a % of those in attendance at the meeting voting to change.

Do your Bylaws say anything about the date the Board has to set for a Special Meeting? To review what the statutes say:

Missouri Condo Statute
"Not less than ten nor more than sixty days in advance of any meeting, the secretary or other officer specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by United States mail to the mailing address of each unit or to any other mailing address designated in writing by the unit owner.

Missouri Nonprofit Corp Statute:
"If a notice for a special meeting demanded under subdivision (2) of subsection 1 of this section is not given pursuant to section 355.251 within thirty days after the date the written demand or demands are delivered to a corporate officer, regardless of the requirements of subsection 4 of this section, a person signing the demand or demands may set the time and place of the meeting and give notice pursuant to section 355.251."

Assuming the Board does not cooperate, the earliest your group could send notice for a Special Meeting is 30 days after receipt of the demand letter. Notice has to be sent "no fewer than ten, or if notice is mailed by other than first-class or registered mail, thirty, nor more than sixty days before the meeting date;" Here's a possible timeline:

Sep 7: Send demand letter. President receives it on Sep 14 (per USPS receipt returned to your group).

[30-day clock starts. 30 days go by.]

Oct 15 Set date for meeting on Oct 25. Send notices on Oct 15 to all owners by first class mail and flyers under doors. Email owners also. Document sending out this notice.

Stay tuned and see if any of the HOA veterans have more input on what to put on the agenda for this Special Meeting or how to proceed. The membership has only so much power. But this includes recalling directors. Your group may want to consider recalling all directors, but this puts a lot of legal burden on your group to 'do this right.' Many a recall has failed because owners did not dot every i and cross every t.

ADD ON
This advice from one that thinks most lawyers are scumbags but one of them is my scumbag, not yours.

Thank you. So does the Board President not reside at a Special Meeting?

I would reference the Bylaw section in the letter asking for the Special Meeting and say no more about the Bylaw. Then see what happens (assuming your group goes forward with its request/demand for a Special Meeting).

I think you are asking about strategizing? I do not have suggestions for same, other than informing the Board that they are violating covenants and asking the Board to cease doing so (and so revert back to the original, approved budget's plan). What I am trying to convey is your legal rights and how to see that they are enforced. There are a few ways to proceed. You asked about getting a Special Meeting. I gave you the steps. I do not know if the Meeting would accomplish what you want. It might.

Short answer: Per the Missouri Condo statute, yes.

Long answer: Your group, preferably through an attorney it hires, would send a series of formal demand letters to the Board asking it to adhere to what the Declaration says re assessments or your group (using an attorney) will take the Board to Court, pursuant to Missouri Condo Act Section 448.4-117. This section reads as follows: "Effect of violations on rights of action — attorney's fees. — If a declarant or any other person subject to sections 448.1-101 to 448.4-120 fails to comply with any provision hereof or any provision of the declaration or bylaws, any person or class of persons adversely affected by such failure to comply has a claim for appropriate relief. Punitive damages may be awarded in the case of a willful, wanton and malicious failure to comply with any provision of sections 448.1-101 to 448.4-120. The court, in an appropriate case, may award reasonable attorney's fees."

Your group's attorney and the condo's attorney will have exchanges, in an effort to avoid court. A judge will expect the two attorneys to do all they can to keep this out of court.

If this goes to court and your group wins, t's almost guaranteed that the judge will not award your group the cost of its attorney's fees. It's a rule of law in the United States that judges nearly always exercise.

Ballpark: The initial cost of the attorney will be on the order of $3000. This is just the cost for him or her to review your governing docs and state law and opine about the strength of your claims. Having the attorney send letters of demand will likely run another $2000 or so. Filing in court will run another few thousand dollars.
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If the essence of the agreement is to charge owners in a way inconsistent with the Declaration, then the agreement is invalid, period. I cannot tell exactly what's going on with this alleged "agreement."

Remember, the Board and owners cannot change the original "contract" (meaning the covenants), using a separate agreement or any other means, without a vote of the owners to amend the original contract. The vote in favor of the amendment must be whatever your Declaration or the Condo Act requires. Generally it is difficult to get amendments passed.

Regarding who presides at this Special Meeting: Let's wait until you actually send a request for the meeting to the Board.

Thanks all for your expertise in this matter.
I especially appreciate your insight AugistinD. It has been extremely helpful. Owners will be mailing a letter requesting the Special Meeting this week.
I will update with the outcome.

Thanks again.

Don't need a legal opinion to establish what the Board did is dishonest (switching the budget that was approved). At the very least the minutes of the meeting should be disputed. In the meantime a group of unhappy owners should review by-laws to determine of an emergency meeting can be held.