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.
