Give Board Slack If Budget Is Little Late

QUESTION: Our homeowner association’s fiscal year begins on Jan. 1. The legal documents (CC&Rs;) say that the budget is to be distributed 60 days in advance of the fiscal year. The board of directors mailed the 1993 budget, delinquency policy and reserve study summary on Nov. 17, 1992, stating that Section 135 of the California Civil Code permits mailing this information as late as 45 days prior to Jan. 1, superseding the CC&Rs.;

Some owners feel that the budget information was not mailed in compliance with the law, and that the $10 increase in monthly assessments must be approved by the owners before it can be collected. Is this correct?

Can the association spend money without a properly approved budget, or must invoices wait until a budget is approved by the owners? Can the association follow the current budget until a 1993 budget is approved?

ANSWER: California Civil Code Section 1365 starts out with the phrase “Unless the declaration imposes more stringent standards . . . .” Perhaps your attorney advises otherwise, but I believe the budget and other financial information should have been sent to the owners before the 60-day deadline.

I firmly believe in abiding by the CC&Rs; and the Civil Code, but the board members thought that they were doing the right thing. In this situation, an argument over the missed deadline and the cost of time and money for some owners to contest the validity or legality of the budget is just counter-productive.

Remember, the board of directors is a group of volunteers who are serving because they were elected to represent all of the owners. They cannot be experts in every aspect of the operation of the physical property and the association’s business. Sometimes they will make mistakes. When that happens, the other owners should be reasonable. It isn’t prudent for “concerned owners” to go to extremes and work against the board. After all, you should all be playing on the same team, working for the good of the association.

Whether the budget is proper or not, the bills keep coming in and they must be paid on time or the association’s credit will suffer. The dissidents can’t make everything stop until this is resolved. If the association is forced to go back to the 1992 budget, there may be a shortfall that would require a special assessment. One way or the other, the owners have to pay the costs of operating the association.

Will it benefit the association to force the board to put the 1993 budget to a vote of the owners? In my opinion, it isn’t necessary, but that may be the only way to restore harmony. Since a $10 increase seems reasonable, wouldn’t most of the owners vote for it? While the board is wrestling with this brouhaha, what other problems are they ignoring or putting on hold?

My suggestion to the board would be to decide quickly whether they are going to stick to their guns and keep the new budget or organize a vote of the owners to approve it. Once the question has been decided, how about putting the owners who are questioning the legality of the budget on the finance committee for next year with the goal of distributing the budget information properly? You may find that they would prefer to sit in the background waiting for someone else to mess up so that they can complain.

Associate living would be so much more satisfying if people would have patience with one another. On the other hand, bickering not only wastes a lot of time. It is very detrimental to the association because it creates an atmosphere which discourages owners from serving on the board.

Check CC&Rs;, Lawyer on Window Repair Q: A bottle was thrown through the front window of a second-story condominium. Is this an association expense or must the owner pay for it? Since the window is a part of the exterior of the building, who is responsible?

A: Sometimes the answer to this question can be found in the association’s governing documents. The “condominium plan” is a document that often explains the actual ownership of the common areas and the units and the accompanying responsibility.

Sometimes the Declaration of Covenants, Conditions and Restrictions (CC&Rs;) states whether the owner of the separate interest (condominium unit) or the association is responsible for window repair and replacement. Many condominium documents state that the unit owner simply owns the cube of airspace or, in some cases, the paint or wall covering or other improvements on the interior of the unit’s walls. The structure is owned by the association.

This is a legal question and an insurance question that requires the expertise of an attorney and the association’s insurance agent. Vandalism like this may be covered under the association’s insurance policy. However, many policies have an exclusion for windows. In addition, the amount of the deductible may preclude filing a claim.

To help clarify the line between owner responsibility and association responsibility, the association’s insurance agent should send a letter to the association informing the owners of the types of losses that the association’s insurance policy covers and those that the owners’ policies should cover. The owners should be informed about the amount of the deductible so they can adjust the coverage on their own policies accordingly.

The association needs to seek professional advice. This issue could easily come up again. If the association assumes the responsibility for the repair, a precedent may be set for more repairs and maintenance in the future. Hickenbottom is past president of the Greater Los Angeles chapter of the Community Associations Institute (CAI), a national nonprofit research and educational organization. She welcomes readers’ questions, but cannot answer them individually. Readers with questions or comments can write to her in care of “Condo Q&A;,” Box 5068, Thousand Oaks, Calif. 91360.