What are the ramifications if members vote down a budget?

The ramifications are that the old budget stays in effect and dues are collected in accordance with the most recently ratified budget. At our last bug-rat meeting, we were lowering dues, and I was clear if the budget was not ratified, then dues would stay at last years (higher) level.

Keep in mind that typically 51% of all homeowners have to vote down a proposed budget (not 51% of those in attendance, 51% of all homeowners) so it is really a high bar to cross to vote down a budget.

It does seem to me that if the new budget affected the dues, then the rejection of the budget would have a real consequence, because the dues would not change. But if the new budget mainly changed how money is spent, I'm not sure rejecting the budget would really change anything - the board could just continue to spend money based on the priorities of the new budget.

In our community the bar is not quite as high. We will have 656 homes in total, but just 200 in a 55+ community within the community as a whole. The bylaws allow the budget to be rejected if a majority of the 55+ community vote it down. So we would only need 101 votes. That is sort of our protection against a board that chooses to, say, underfund the 55+ amenities. But I'm curious if it really offers any meaningful protection.

I answered this before, but perhaps it was missed in the nuance. The previously ratified budget stays in place until a new budget is ratified. Thus, you collect revenue and have authority to spend money as you normally do.

In most or all states, there is no requirement that you spend according to your individual line items in your budget. Those are just guidelines. So in most or all states, you have full ability to spend to your heart's content.

Basic math again. Sure, the board can spend it on whstever, but prices can and do go up. What happens if your D & O insurance skyrockets halfway through the year and throws the budget out of whack? You may need to make some tough decisions to determine the essentials and delay some projects and/or reduce some services A-Rod and you know that may not go over well with some homeowners.

Maybe it's just me, but that's why this stuff matters. At least I know it matters in my own household budget. As a board member, I always tried to apply the same care to the association budget as my own, because I don't want to be hit with special assessments or risk a reduction in services.

It's also why you take time to explain the situation to homeowners so they can make an informed decision. They may still reject the budget, but if so and something happens down the road, you can remind them of this decision. Actions always have consequences.

Wrong. See the statute section. A dedicated "budget ratification" agenda item is needed.

-- What is a Legacy Owner?

-- I am going to backpedal and say that I think the statute means a majority of all owners, regardless of whether they attend in person or by proxy, must vote to reject for the budget rejection to have legal force.

Me too. I had been thinking that this just means that, even though a quorum is absent, owners present in person or by proxy could still take this one action (voting on whether to reject the budget), and the outcome would have legal validity (that is, even in the absence of a quorum). If quorum is 50% or less, this does not make sense. If perhaps quorum is 60%, then this could make sense.

Or is the statute and your governing documents anticipating absentee voting (to be distinguished from voting in person or by proxy)? This seems a strech.

What is the quorum requirement for the annual meeting?

David, is your board looking to change the bylaws once you get developer turnover? Because this is one rule you might want to change. I can't imagine trying to get homeowners to ratify a budget every year. To me it's unworkable. I know a budget is just a guideline, but some years you do have to increase dues in order to increase reserve funding or for a special project or even just inflation. Most homeowners are not going to agree to pay more money because most homeowners don't care enough to read the why - just the amount.

My expectation is the at least half of all owners won't bother to vote. Which would make rejection of a budget almost impossible unless there is something in there that really fires everyone up.

David,

The answer to your question is prescribed in your CIC statutes: https://delcode.delaware.gov/title25/c081/index.html. Delaware adopted UCIOA.

§ 81-324. Adoption of budget.
(a) The executive board shall, at least annually, prepare a proposed budget for the common interest community. In a condominium or cooperative, the proposed budget shall include a line item for any required funding of a repair and replacement reserve. Within 30 days after adoption of any proposed budget after the period of declarant control, the executive board shall provide to all unit owners a summary of the budget, including any reserves and a statement of the basis on which any reserves are calculated and funded. Simultaneously, the executive board shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 60 days after providing the summary. Unless at that meeting a majority of all unit owners or any larger vote specified in the declaration, voting in person or by proxy, reject the budget, the budget is ratified, whether or not a quorum is present. If a proposed periodic budget is rejected, the periodic budget last ratified by the unit owners must be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.

(b) In addition to adoption of its regular periodic budget, the executive board may at any time propose a budget which would require a special assessment against all the units. Except as provided in subsection (c) of this section, the special assessment is effective only if the executive board follows the procedures for ratification of a budget described in subsection (a) of this section and the unit owners do not reject that proposed special assessment.

(c) If the executive board determines by unanimous vote that the special assessment is necessary in order to respond to an emergency, then: (i) the special assessment shall become effective immediately in accordance with the terms of the vote; (ii) notice of the emergency assessment shall be promptly provided to all unit owners; and (iii) the executive board shall spend the funds paid on account of the emergency assessment solely for the purposes described in the vote.

Regards,
Steve

What on earth made you think any of this would be easy??? Speaking truth to power never is.

You started this by talking about the budget and that's why I responded the way I did.
Now you're talking about the board election and those folks will be the ones who set the budgets. Apparently you want a hand in that and so you're running. Fine - if that's what you want you can run by encouraging as many people as you can, within and outside the 55+ residents to show up and participate in this election.

There may be more homeowners than those in the 55+ group, but that doesn't mean is lost. If you can get nearly all of your group plus enough of the other group, you could win. However it will take work and even if you don't win this, that doesn't mean you can't regroup and start over, learning what worked and didn't work.

You could start by holding all the board members accountable, whether you win or not. And maybe introduce yourself to some of the people in the larger community to try and tear down this "us vs. them" give going on. Developing relationships takes work and someone has to start it - that may end up being you.

The question now is If you're willing to take that on or keep wringing your hands about how hopeless is. What would happening YOU made your pitch to the community calling for an end to the generation gap?

Underfund what in particular? And what are the possible effects of such underfunding?

You mean like maintain the 55+ section's pool to a lower standard? If the HOA does not maintain the 55+ part of the HOA the way it maintains the rest of the HOA, and the inappropriate maintenance and underfunding are clear, I think you folks have more legal clout than you imagine.

As an example, the pool deck and clubhouse patio area (where we have lots of social events) are inadequate in size for the number of homes we will have a build-out. We have come up with plans to expand it at some point, including more furniture and shelter to allow us to have large outdoor events even when it rains. We could/should be able to do that with our own money that we already pay into our own common elements fund. It's our money, and our amenities, we should be able to use it as we wish. But the other homeowners will get to decide how our money is spent. They could say "No" with no recourse for us.

We also don't allow children in our clubhouse, pool, gym, or pickle ball court. They could eliminate that rule. Granted, only 55+ grandchildren would have access, but we have a handful of residents who would abuse that.

There are any number of things I can think of that a spiteful board could do in order to make our lives miserable, and we will always lack the voting power to stop it.

I have seen, in state law, where "by laws" are codified in statute to cover HOAs that are somehow unofficial or not filed.