Many condominium and homeowners’ associations are preparing their annual budgets this time of year. Association members, as well as the association’s board of directors, need to be aware of the laws applicable to community association budgets.
A budget is an estimate of the future financial needs of the association. A budget needs to provide for collecting assessments to pay for ongoing expenses and for contributions into the reserve fund, as well as any other matters necessary for both the short- and long-term operation of the association. Designing the budget is the responsibility of the association’s board of directors.
Washington’s Condominium Act (RCW 64.34) requires “New Act” condominium associations to prepare an annual budget. All condo associations must have a budget in order to collect assessments. HOAs (created under the HOA Act, RCW 64.38) are also required to prepare an annual budget.
It is essential that every association examine its governing documents (the Declaration/CC&Rs, Articles of Incorporation, Bylaws, and other relevant documents), because those documents may contain rules, procedures, or requirements for the community’s budget in addition to those imposed by statute. You may also wish to consult with your association’s attorney for help in understanding what your budget must contain and how it must be adopted.
HOAs and New Act condos must follow a process mandated by statute:
(1) The board must adopt a proposed budget.
(2) The board must, within 30 days of adopting the proposed budget, provide a summary of it to all the owners.
(3) The board must set a date for a budget meeting where the owners will vote on whether to reject the proposed budget. If the budget is rejected, the old budget continues in effect until a new one can be ratified.
Old Act condos are not subject to these statutory rules, but should check their governing documents to see what is required. All associations need to check their governing documents to determine what procedures they are required to follow other than those mandated by the statute (i.e., how many days’ notice must be given to owners regarding the budget meeting, etc.).
In addition to these procedural requirements, there are also substantive requirements. Both an HOA’s and a New Act condo association’s budget must include certain information specified in RCW 64.34.308(4) and RCW 64.38.025(4). We’ll cover the specific information that is required for HOAs and New Act condos in a future blog post.
If you have any questions we can answer, please feel free to leave a comment or contact us directly. We look forward to continuing this conversation with you in our future posts!