AND NOW FOR THE HARD PART

For the past two weeks we discussed how difficult it has now become to prepare the annual budget.  Well suppose you had to prepare two budgets instead of one?  In many condominiums that’s now the case.  Here is the new law:

If a board proposes adopts in any fiscal year an annual budget which requires assessments against unit owners which exceed 115 percent of assessments for the preceding fiscal year, the board shall simultaneously propose a substitute budget that does not include any discretionary expenditures that are not required to be in the budget. The substitute budget must be proposed at the budget meeting before the of the annual budget. At least 14 days before such budget meeting in which a substitute budget will be proposed, the board shall hand deliver to each unit owner, or mail to each unit owner at the address last furnished to the association, a notice of the meeting. An officer or manager of the association, or other person providing notice of such meeting shall execute an affidavit evidencing compliance with this notice requirement, and such affidavit shall be filed among the official records of the association. Unit owners must consider and may adopt a  substitute budget at the meeting. A substitute budget is adopted if approved by a majority of all voting interests unless the bylaws require adoption by a greater percentage of voting interests. If a substitute budget is not adopted, the annual budget previously initially proposed by the board may be adopted.

The term “discretionary expenditures” is nowhere defined in the statute.  Why do I have a feeling there’s going to be arguments about what is and what isn’t?

ARE RESERVES FACTORED INTO THE 115% NUMBER?

In a word NO.  The new statute states that:

Any determination of whether assessments exceed 115 percent of assessments for the prior fiscal year shall exclude any authorized provision for required reasonable reserves for repair or replacement of the condominium property, anticipated expenses of the association which the board does not expect to be incurred on a regular or annual basis for the repair, maintenance, or replacement of the items listed in paragraph (g), and insurance premiums.

Preparing the budget(s) is simply not as easy as it used to be.  If you’re not sure of what to do or not do, ask the association’s attorney first.