Sunday, 28 May 2017

Ask The HOA Expert: Reviewing And Approving Annual Budgets

Written by Posted On Tuesday, 16 May 2017 19:52

Question: Our budget process takes place in the fall so we will have an approved budget at least 30 days prior to the start of our fiscal year which begins in January. As it turns out, we hold our annual meeting in January and a new board will be elected then. All of our contracts expire next year. Should the current board review, renew and/or secure new bids for our contracted services as part of the budget process or wait for the new board to build its own budget?

Answer: Since the new budget will likely increase fees to owners, the current board should review and approve the next year's budget so that the new fee structure will go into effect January 1. If the new board decides to amend the budget in some way, that's its prerogative.

Question: Our board is negotiating a management agreement with a local property management company. Can you give me a idea of what the average cost per door is for HOA management? We'd also like to review a menu of services so we can customize our agreement to our needs.

Answer: There is no "average" cost per door. Cost of HOA management service is directly related to the scope of work. The board needs to develop a scope of work and request proposals from at least three qualified HOA management companies with references to prove it. If you are in a major metropolitan area, look for a chapter of the Community Associations Institute which often has many HOA management companies as members (see www.caionline.org) For assistance in preparing the scope of work, subscribe to www.Regenesis.net and view Manager Issues section for Request for Management Proposal.

Question: Can a director of the board give his proxy to someone else to vote at a board meeting?

Answer: No. Proxies can and should be used for the annual owner meeting for elections and other business brought before the group for a vote but directors of the board cannot proxy their authority to someone else.

Question: A unit owner has requested that the HOA repair damage to his unit deck that was caused by a prior owner. It looks like burn marks from a barbecue. This owner claims the HOA should inspect units for sale so this kind of damage is repaired prior to sale closing.

Answer: This damage is not normal wear and tear and damage caused by a resident is not the responsibility of the HOA. And, no, the board or management is not responsible to inspect units that are for sale. Presumably this owner did not buy the unit sight unseen and likely knew of the damage before closing the deal. If it was a deal breaker, he should have made sure the seller fixed it, not the HOA.

While HOAs are often responsible to repair and replace things like decks, it should maintain all units in a consistent and cost effective manner, and not to increase a particular unit's value or marketability.

For more innovative homeowner association management strategies, subscribe to www.Regenesis.net

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Richard Thompson

Richard Thompson owns Regenesis, a management consulting company that specializes in condominium and homeowner associations. He is a nationally recognized expert on HOA management issues.

Regenesis publishes The Regenesis Report, a monthly newsletter for HOA boards, developers and managers. To subscribe, go to Regenesis.net. He can be contacted by email at rich@regenesis.net.

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