W.C. from Hartford County writes:
Dear Mister Condo,
Our owners recently rejected the budget for 2014 presented by the Board. The Board quickly closed the meeting with the acknowledgement that they will not submit a new budget, must now use the last (2013) budget approved by unit owners. Further, they informed us that upcoming expenses could exceed this budget and the Board will likely make special assessments of owners up to 15% before they had to ask owners for approval.
The State Statutes say that when the new budget is rejected, the Board uses the last approved budget until a new budget is approved by unit owners. It is not clear whether the Board must resubmit a new budget. If the Board can operate without an approved budget it seems to me that owners lose one of the few powers they have in condo management. It seems irresponsible to me that the Board intentionally intends to overspend a budget without repercussions. Is the Board right in this situation and what can owners do to correct it?
Mister Condo replies:
(Editor’s Note: This is a follow-up to a question from W.C. posted on Nov. 27, 2013. Since it deals with a slightly different issue it is being posted as a fresh question. The original post can be found at http://askmistercondo.com/consequences-of-a-rejected-condo-budget/)
W.C., since the annual budget was rejected by the membership, the Board had no choice but to use the previous year’s budget. If the known expenses for the upcoming year will not be covered from the expected revenue collected from common fees they may have no choice but to use a special assessment to make up the shortfall. This is very basic accounting where revenues must offset expenses. As long as they aren’t violating any of the association’s rules on special assessments and they are acting within state law, there is no wrongdoing and nothing for unit owners to be too upset about.
That being said, there is plenty that unit owners can do to prevent a Board from behaving in such a way that it does not represent the best interests of the unit owners. The simplest way to stop the Board is to vote them out of office. That happens at your next Annual Meeting during the election process. The most radical is to recall the Board via special election. Your by-laws will instruct you how to do that. Either way, you and like-minded folks need to be prepared to step up, volunteer to serve and be elected by your fellow unit owners.
The volunteers who currently serve on your Board are all volunteer community members just like yourself. During the election time of your association they were democratically elected by the unit owners to conduct the business of the association. If they are not fulfilling their duties to the satisfaction of the majority of unit owners, there is no reason they should be re-elected. Of course, if no one challenges them and they run for re-election unopposed, the community members can blame no one but themselves as they reach for their check books and write out the checks for the special assessment which is very likely heading their way.
The bottom line is that preparing an annual budget for a community association is challenging work. It takes a little math and a little guesswork to come up with a budget all unit owners can live with. Since you and your fellow unit owners were unhappy with the annual budget as presented it may be time to dig deeper and find out why more money is needed. If your elected representatives aren’t getting the job done you should vote them out. However, in these times of escalating costs and escalating loss of revenue due to foreclosures and delinquencies of common fee payments from unit owners, it may just be a harsh reality that your association needs more money to function. Best Wishes!