E.C. from Middlesex County, Connecticut writes:
Dear Mister Condo,
Once a budget has been approved by home owners, if an expenditure that was not in the budget is decided to move forward, do you have to get approval again from homeowners? Is there an amount that equals or exceeds where the Board has to get approval?
Mister Condo replies:
E.C., it really depends on the type of expenditure. For instance, if it is time for a new roof and the Reserve Fund has been properly funded, the Board can simply pay for the roof out of the Reserve Fund as was always the plan. No additional homeowner vote would be required. If the roof needs to be replaced and the money is coming from the Operation Fund, special assessment, or an HOA loan that binds the community to long-term payments that is a different matter and may very well require a vote of the membership to move forward. You need to look at your governing documents and/or state law to determine when a vote is needed. The Common Interest Ownership Act (CIOA) designates a 15% variance as the tolerance point. So, if your Annual Budget was approved at $100K and the Board is planning on spending $150K (a 50% increase), a new vote would be required if your association is subject to the CIOA provisions. If the Board is planning on spending $110K (a 10% increase), a new vote would not be required. I hope that helps. Good luck!
My understanding is the 15% law in CT does not apply to spending, it applies to assessments. So if the Association has the money in general they can spend it, but if they need more then they need an assessment.
L.W., you are correct. However, in theory, surpluses don’t exist as they need to be returned to the owners or voted to be kept in either Reserves or Operating Funds each year. Bottom line is that spending is tied to assessments and new or “surprise” expenditures over 15% of the budget violates the spirit and intention of the law. If the new expense is going to cause a Special Assessment or need for a loan, you can bet at least one unit owner is going to cite the law. I know I would.