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Increased Dues and Annual Budget

Started by MichelleC8 • 19 replies • 743 views

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MichelleC8 (California)
Posts: 80
Posted:
Big question.

Is an annual budget and increased dues legal if this was not voted on by the board.
It’s a silly question, but something similar has happened at an HOA I am connected to.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Technically, no.

However, I would not withhold payment, as that could bring legal action against you.
Also, I would not pay short, as that could bring legal action against you.

Are you sure it wasn't voted on?

Perhaps via action without meeting (due to covid)?

Worst case, lets say the action didn't follow proper procedures.
Are you willing to go to court over it?

JohnC77 (California)
Posts: 562
Posted:
Unless this was an emergency, Action Without a Meeting would not apply. Budgets and increases must be voted on by the board or in some cases by the members. In California, 30 days notices MUST be given prior to any increase or special assessment.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Quote:
Posted By JohnC77 on 11/30/2020 3:35 PM
Unless this was an emergency, Action Without a Meeting would not apply.

In doing some research, it appears that many opinions said that the pandemic applied as an emergency. However, that was early on (Mar/April/May).

More recent opinions/articles show that the pandemic is not considered an emergency and CA boards should hold open meetings (but it suggested to do so via zoom or other meeting platform).
KerryL1 (California)
Posts: 14,550
Posted:
Do I remember that you're on the Board, Michelle?

Has the budget already been sent to owners? Do you have a property manager who mails out the budget?
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Mich

Not really clear on your question but as I have posted before, which may or may not fit your situation:

Below is cut from our Covenants. In summary, the BOD can do a once a year for any amount increase. Owners must be notified on or before 12/01 and it becomes effective 01/01. Owners do not have/get to approve it. They (a majority of all owners) can reject it though. It would take a Special Meeting and 51% of all owners disapproving.

Section 3. Contribution.
It shall be the duty of the Board to prepare a budget covering the estimated costs of operating the Association during the coming year, which may, if applicable, include a capital contribution or reserve in accordance with a capital budget separately prepared. The Board shall cause the budget and the assessments to be levied against each Lot for the following year to be delivered to each member at least thirty (30) days prior to the end of the current fiscal year (or, if the assessment has not been established at the time an Owner purchases such Owner's Lot, at least thirty (30) days prior to the due date of the first installment in the ease of the initial budget). The budget and the assessment shall become effective unless disapproved at a meeting by a majority of the Total Association Vote. Notwithstanding the foregoing, however, in the event the membership disapproves the proposed budget or the Board fails for any reason so to determine the budget for the succeeding year, then and until such time as a budget shall have been determined, as provided herein, the budget in effect for the then current year shall continue for the succeeding year, but shall be increased by a factor equal to the percentage increase in the prior year of the US Consumer Price Index (CPI-U) for All items in Urban Areas as published by the United States Bureau of Labor Statistics.
JohnC77 (California)
Posts: 562
Posted:
Unlike South Carolina, there are procedures that must be followed in California.
SheliaH (Indiana)
Posts: 6,964
Posted:
It's not a silly question, but you should start by reading your documents. Then go to the Board and ask them (did you? If so, what was the response?)

It seems odd the board would call for increased assessments without a vote, so are you sure you're talking about board approval or homeowner approval (there is a difference). In some communities, homeowners must approve the budget if the assessment will increase by a certain percentage over the current year (5% in my community). In other communities, homeowners must approve any increase, while in others, the board has complete authority over assessment increases.
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
JohnC77 (California)
Posts: 562
Posted:
In California, special assessments over 5% and assessments over 20% must be approved by the membership. If an increase is being done, membership must be notified 30 prior to the start date.

If the association is on a Jan-Dec fiscal year, Annual Budget Packets and Annual Disclosure are required to be sent out 30 prior to the end of the fiscal year, meaning today is the deadline.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By JohnC77 on 12/01/2020 9:23 AM
In California, special assessments over 5% and assessments over 20% must be approved by the membership. If an increase is being done, membership must be notified 30 prior to the start date.

If the association is on a Jan-Dec fiscal year, Annual Budget Packets and Annual Disclosure are required to be sent out 30 prior to the end of the fiscal year, meaning today is the deadline.

Are you saying the BOD and the BOD alone could raise the Annual Assessment (Annual Dues) less than 20% (let us say 19.99%) without owner approval?

Had my BOD done that for two years in a row, we would not have needed the 40% increase we did.
JohnC77 (California)
Posts: 562
Posted:
Actually they could raise it 20% without membership approval. Anything over does require membership approval. It must be voted on and it must be put into the minutes and notice must be given to all owners 30 prior to the start f the new assessment.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By JohnC77 on 12/01/2020 9:46 AM
Actually they could raise it 20% without membership approval. Anything over does require membership approval. It must be voted on and it must be put into the minutes and notice must be given to all owners 30 prior to the start f the new assessment.

How often can they do this? We can only do it once a year. On or before 12/01 we have to notify owners (via presenting the next year's budget) to become effective 01/01.
JohnC77 (California)
Posts: 562
Posted:
Rule of thumb is you're probably going to need membership approval. If you don't send out Annual Budget by due date, you're SOL. I've mnever had to d this, the better option is a special assessment.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By JohnC77 on 12/01/2020 11:10 AM
Rule of thumb is you're probably going to need membership approval. If you don't send out Annual Budget by due date, you're SOL. I've mnever had to d this, the better option is a special assessment.

Did not mean to imply we intend on raising dues, yet. The 40% increase we did is committed to go to our Roofing/Siding Reserves. The BOD has discussed a 5 to 10% dues increase but we have decided not to do it effective for 2021 but I expect in 12/01/2021, we will do it effective 01/01/2022.

Any Special Assessment we have to get approved by 2/3rds of ALL OUR OWNERS thus probably near impossible.
JohnC77 (California)
Posts: 562
Posted:
Meant rule of thumb applies to California only. Passage of a special assessment is a majority of quorum.
GeorgeS21 (Florida)
Posts: 3,808
Posted:
Example - my current 659 SFH HOA has CCRs that say:

"A. From and after January 1, 2008, the maximum annual assessment may be increased each year by not ore than twenty-five percent (25%) above the maximum assessment for the previous year with a vote of the Owners."

Next para says 2/3 supermajority required.
MichaelS56 (Minnesota)
Posts: 858
Posted:
I find it interesting that all across this country there is such a wide range of percent's that monthly assessments may go up at one time. The answers that indicate a limit of 5% increase per year, appear to force the Board to plan well near term and long term. Good for you.
GeorgeS21 (Florida)
Posts: 3,808
Posted:
Actually, I would assess a 5% annual limit as dangerous to the well being of the association, writ large; it is simply too limiting.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By MichaelS56 on 12/01/2020 4:26 PM
I find it interesting that all across this country there is such a wide range of percent's that monthly assessments may go up at one time. The answers that indicate a limit of 5% increase per year, appear to force the Board to plan well near term and long term. Good for you.
My feeling: Maybe. In my experience HOA/condo Owners do not understand, and will object to, even a yearly COLA increase in the assessment, especially if the Reserve Account has say $100,000 in it that, in the words of many math- and financial-illiterate owners, "is just sitting there while we Owners are forced by the Board to pay a higher assessment for no good reason." (Never mind that the previous year's study indicated the Reserve Account should have $800,000 at the current point in time.)

I doubt a 5% annual limit for raising the regular, annual assessment is very common.
Quote:
Posted By GeorgeS21 on 12/02/2020 7:06 AM
Actually, I would assess a 5% annual limit as dangerous to the well being of the association, writ large; it is simply too limiting.
All things considered, and in particular given the math- and financial-illiteracy of even those with PhDs, I tend to agree.

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