Under Development

Access Management Group received the following message from a homeowner living in a developer-controlled community (that we do not currently manage):

I am a concerned resident at the ABC Homeowners Association.   I was under the impression that the recent Annual Meeting was to discuss the budget.  Instead, it was a hodgepodge of resident complaints, an attempt to dispel rumors and issues related to the turnover and an attempt to clarify who and what the developer is responsible for and what the county and the residents are responsible for as it relates to the turnover.

I recommend that we have a series of annual meetings each year, with one specifically addressing the budget.  In that meeting the residents would review the budget line by line.  The other meetings could possibly cover specific homeowner concerns.  

I do not in good conscious approve the proposed budget.  In order to prevent the residents from this sub-division from going into debt, I am proposing a "secured funds" budget.  Using only those funds received between the day the HOA assessment notices are mailed to residents to the day the pool opens each spring.  Those funds received after the pool opens to year end, and funds from previous years would be placed in a "Catastrophic/Emergency" fund in the event of a major sub-division crisis.

I am also asking for guidance in how the budget is created, developed and implemented by a vote of the residents and proposing a change in the charter or governance of how the budget is created, developed, implemented and approved as outlined above.

Our response to this homeowner was as follows:

Thank you for reaching out to us.  As we weren’t in attendance at the meeting and do not directly manage the community, we can only speak in general terms about processes and procedures, and defer to your community manager to answer particulars.

Our understanding is that your community is still under developer control.  If this is true, the process for budgeting is limited:  The developer may construct a budget with or without the input of appointed homeowners.  The developer has final say in the nature of the budget, and is not obligated to hold in-depth discussions or justify processes.

Once control of the association has been turned over to the homeowners, they may elect Board members responsible for drafting future budgets.  This Board may choose to establish a temporary budget committee composed of a few homeowners to put together a proposed budget, but it is ultimately the Board that has the final say.  A budget committee is the appropriate forum for the line-by-line review as requested in your letter.

While the Board may choose to call for a community-wide budget meeting, this is not part of the annual meeting, which is reserved for only high-level business items (electing Board members, and possibly a community vote on budget approval if the documents permit it).   The annual meeting usually lasts perhaps an hour, as is not designed to tackle contentious issues.  It is the one meeting most homeowners choose to attend each year, and the best way to drive up community apathy is to host unpleasant annual meetings.

In many communities, only the Board votes on the budget, with homeowners having the option to vote it down only if a majority of all homeowners call for a vote and vote against it.  Again, your community manager will be able to address particulars on your association’s budget.

Homeowners and Board members frequently do not have a frame of reference for what is “normal” when running a community association.  When working up a solution for a problem in your community, it is always best to first gather information about the typical processes and procedures observed elsewhere.  A great venue for gathering this information is to attend meetings hosted by Community Associations Institute (CAI) –you can use the internet to locate a chapter of this organization operating near you!