How much 'wiggle room' exists in a proposed budget?
By David M. Bendoff
Q: In order to meet the Illinois Condominium Property Act requirement to distribute a proposed budget to homeowners at least 25 days prior to board approval, the board distributed a very rough draft budget for the upcoming fiscal year with the statement: "These are subject to change at the final approval meeting of the budget."
The rough draft budget distributed to owners reflected about a 2% raise in assessments; however, the actual budget adopted by the board reflects an increase in assessments of more than 8%.
I can appreciate there has to be some "wiggle" room between the proposed and final budgets, but how much "wiggle" is appropriate?
A: The Condominium Property Act requires "(t)he board of managers shall prepare and distribute to all unit owners a detailed proposed annual budget, setting forth with particularity all anticipated common expenses by category as well as all anticipated assessments and other income." The Act goes on to state "each unit owner shall receive, at least 25 days prior to the adoption thereof by the board of managers, a copy of the proposed annual budget together with an indication of which portions are intended for reserves, capital expenditures or repairs or payment of real estate taxes."
The Act does not address the authority of the board to adopt a budget that varies from what has been distributed to the owners. That said, I have suggested, consistent with views of colleagues, that nonmaterial changes are probably going to be OK. Preparing and distributing a "shell" budget solely for the purpose of meeting the requirement that owners receive a copy at least 25 days before it is adopted does not seem to conform to the spirit or intent, if not the actual language, of the Act.
The substantial difference in the budget and related assessment distributed to owners and adopted by the board could give rise to a successful challenge to the budget/assessment increase.
Q: The president of our condominium prohibits owner interaction at most board meetings. Is this within his authority?
A: Owners in a condominium are permitted to attend the open portion of board meetings. However, owners are not entitled to interact with the board during board meetings. Therefore, the board president does not need to recognize owners at a board meeting.
Further, the board of a condominium is not required to reserve a portion of the meeting of the board for comments by owners. Whether or not to do so would be a matter within the discretion of the board. That said, many condominium boards do allow an owner forum at board meetings.
Note that a common interest community association board must reserve a portion of the meeting of the board for comments by members. However, the duration and meeting order for the member comment period is within the sole discretion of the board.
Q: The board of our association has discontinued executive sessions at board meetings. Is this a good idea.
A: The governing statutes for associations in Illinois allow the board to meet in a closed session of a board meeting, or separate from a board meeting, to discuss various specified topics. While the board is not required to discuss these various topics in closed session, there are a variety of reasons why a board should generally avail themselves of the opportunity to do so; rather than discussing these topics in an open session. Note too that any vote on matters discussed in a closed session of the board must take place at a meeting of the board or portion thereof open to any unit owner.
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.