Most community associations have their budget meeting in the
month of November for the upcoming year. By doing it in
November there is plenty of time to print new coupon books and
let the community members know what the new monthly assessments
will be for the coming year.
In terms of notice, in a condominium the budget must be sent to
the owners at least 14 days before the budget meeting. In an
HOA, The association shall
provide each member with a copy of the annual budget or a
written notice that a copy of the budget is available upon
request at no charge to the member.
Don’t forget that in a condominium, in addition to annual
operating expenses, the budget must include reserve accounts for
capital expenditures and deferred maintenance. These accounts
must include, but are not limited to, roof replacement, building
painting, and pavement resurfacing, regardless of the amount of
deferred maintenance expense or replacement cost, and any other
item that has a deferred maintenance expense or replacement cost
that exceeds $10,000.
Condo boards need to be well aware of the reserve requirement.
To be clear, the Board MUST send out a budget that includes
fully funded reserves. That is all they are required to do.
However, if they want to, they can give the owners the
opportunity to vote for an alternative budget such as a budget
that contains no reserves or partially funded reserves.
Remember that if a majority of a quorum of owners does not vote
for a budget that does not contain full reserves, fully
funded reserves shall go into effect.
In a post Champlain Towers world, I think things may be a little
different this year. I think lots of Board members will want to
have fully funded reserves in their budget. They don’t want to
be short millions of dollars when the time comes, and it will,
for millions of dollars in repairs.
Delinquencies are starting to pick up as well. So, make sure
you have a line item in your budget for “bad debt.” For
example, if your assessments are $6,000.00 per year and you’re
pretty sure that 5 owners won’t pay a dime, you should put
$30,000.00 as an line item in your budget for bad debt. That
way you collect enough money to pay the bills.
Keep in mind that electricity prices are expected to rise 18%.
Also remember that some of your long term contracts may have
clauses requiring automatic rate increases every single year. F
I still get the same question all the time…who passes the
budget; the board or the unit owners? The answer is…the board
and only the board. Food prices are going up, the cost of
materials are going up, electricity is going up, the cost of
labor is going up, and worst of all, insurance rates for
condominiums are simply skyrocketing, with some associations
complaining that their rates have tripled. So, all this means
in no uncertain terms, that condo assessments are about to go up
as well. It also seems pretty clear that it will become
extremely difficult if not impossible to waive reserves starting
next year. Yes, it’s about to get a lot more expensive to live
in a condominium, especially if you were kicking the can down
the road and always waiving reserves. I don’t envy condo boards
at their next budget meetings where they will be forced to tell
the members of their community that their monthly assessments
are about to go up, in fact way up. Buckle up everyone in a
condo, you’re in for a bumpy ride going forward.
