Eric Glazer, Esq.
November 18, 2013
that time of year again --- number crunching time.
Time to figure out if everyone is going to be paying a
little more next year in their monthly or quarterly assessments.
Here are some things to keep in mind:
In a condo -- when the budget is mailed to the
owners, the budget must show the reserves as fully funded.
If the Board is going to give the owners the right to
waive the funding of full reserves, the Board can also show what
the budget would look like with partial funding of reserves or a
complete waiver of reserves.
But in any event, everyone must be shown a budget with
fully funded reserves. Notice
that I said "IF" the Board is going to give the owners
the right to waive full funding of reserves.
There is nothing in the statute that requires the Board
to give the owners this choice.
So, for all intents and purposes, if a Board wants fully
funded reserves, they get them.
Sure, the owners would have a right to call a meeting and
vote them down later, but I have never seen that happen.
In case you haven't heard, there is a foreclosure
crisis here in
. That means you
should include a line item in your budget for "bad
debt." This is
a figure that equals the amount of money you are not likely to
receive from the unit owners in assessments, because their homes
are in some form of collection.
It gets added back into your budget, so that at the end
of the year, you actually collect all of the money necessary to
pay the association's bills.
If you don't include a line item for bad debt, there is a
likelihood that at the end of the year, you will run short and
have to pass a dreaded special assessment.
In an HOA - reserves must be included in your
budget if the developer placed them in the budget while the
developer maintained control of the community, if the owners
previously voted for reserves, or if the Board simply wants
reserve funding in the budget.
If done solely by a board vote, the board cannot exceed
any limitations on the amount of the budget as reflected in the
governing documents, if any.
If your association has a huge surplus at the end
of the year, it is not automatically allowable to transfer that
surplus into a reserve account.
Suppose the owners have voted against the funding of
monies should either be returned to the owners or credited
against next year's future assessments.
Despite the fact that your association is a not
corporation, you are still required to file a federal tax
return. I am
amazed at how many associations have not filed returns for years
Remember to give proper notice of the budget
meeting to the owners. 14
day advance notice for a condominium.
In a HOA - notice is determined by your governing
As I said, reserves can be waived by the owners.
However, if not waived properly at a meeting of the
owners, the budget with fully funded reserves goes into effect -
LIKE IT OR NOT.
times, the budget meeting unfortunately turns into a shouting
match. It really
Board's job is to simply pass a budget that ensures he bills get
paid as they come due. Nothing
more, nothing less.
I wish for all you this year significant decreases in your
assessments, smaller bills for your windstorm insurance, 100%
collection of assessments from your owners and to be litigation
free. Well maybe not