Underbudgeting: The Pitfalls of 

No doubt that many boards feel pressure to lower— or at least not increase—monthly assessments. Yet, the  or CPI increase relative to last year’s budget can be 

 Owners become accustomed to the way things have  pressure to keep assessments low, thinking that owners  The reasons are practically countless. Yet, if owners say they cannot afford a $50 monthly increase, for example, just think how the membership would handle a large special assessment.

   condominium’s siding, windows and decks begin failing, but the association has virtually no reserves. A special assessment, and perhaps an association loan, are often the next issues the board has to navigate. When a board  I have yet to counsel a board that did not express regret for not assessing more in previous years.

Preparing the right budget that serves the association’s best interests should not start by concentrating on the  by focusing on their particular association’s expenses based on their governing documents have a better chance of avoiding future budgetary issues.

Underbudgeting, and subsequently having to raise funds by special assessment, is not altogether uncommon. While there are ways to successfully deal with a major repair or other expenses coupled with underfunded reserves, the sooner an association sets the right budget, the lower its chance of a special assessment.

Appropriate Budgeting & Funding

Shake roofs, membership’s demand and wishful thinking.

In the early 90s, seven Old Act condominium buildings with original shake roofs from the late 70s, began experiencing some roof leaks. For a while, patching worked although repair  denting the budget.

The next year, with advice from management and assessments and begin replacing roofs over three years. At the budget meeting for the Declaration- required membership vote, opposition to the increase was angrily vocal. Mr. W., an original owner sitting in the front row loudly stated to  gone before replacement has to happen and we  budget was roundly rejected, and assessments stayed the same for the next year.

But in that very next year, every building suffered more frequent roof leaking. That fall, the Board’s budget proposed a 12% assessment increase plus a $50,000 special assessment to permit all roofs to be replaced the next year. Discussion was again lively and occasionally sometimes quite cranky. I noticed Mr. W. in the front row. His unit had two different roof leaks  you weren’t going to be with us when roof 

The budget with monthly increase and special assessment passed.

By David Silver, Esq., Peryea Silver Taylor, P.S.

By Cameron Hazen, CMCA, AMS