We talked in the last post about preparing the annual budget and things to consider. Today we’ll talk about the HOA meeting and what to expect at the meeting.
For starters, if your community is still controlled by the developer, don’t anticipate an annual meeting. Because the developer still retains control of the Board of Directors of the association, most see no need to have a meeting. Annual meetings are held to elect a Board of Directors and to review the budget for the coming year. Since developers have control of both aspects, meetings are typically not held.
For homeowner associations that are not controlled by the developer, annual meetings are held annually to elect Board members and review or approve the budget for the coming year. However, these meetings routinely do not meet the required quorum and therefore, most Board members are appointed by the existing members of the Board.
What is a Quorum?
Quorum, defined by Websters, is the smallest number of people who must be present at a meeting in order for decisions to be made. What does this mean for your association? It means for elections to take place, a certain number of homes must be represented at the meeting, in person or by proxy.
What is a Proxy?
A proxy is a person who is given the power or authority to do something (such as to vote) for someone else. Properly completed and returned proxies are counted towards the quorum number in order for business to take place at an annual meeting.
So How Does all this Work?
For business to be transacted at an annual meeting and elections to take place and quorum must be present at a duly called meeting. This means the notice for annual meeting was sent out at the appropriate time (consult your documents for specifics), usually no longer than 60 days and no shorter than 14 days. In the meeting notice packet there will be the meeting notice, date, time and place, and a proxy. If you do not plan to attend the meeting or are unable to, complete the proxy and return it to the management company or the point of contact that sent the notice. This proxy will count towards the quorum. Quorum is dictated by the governing documents and can range from 25% up to 75%. If the required number of people are not at the meeting in person or by proxy, the meeting then turns in to an informational meeting. Volunteers for the Board of Directors will be solicited from those in attendance and if approved by the remaining Board members, appointed to the Board.
We talked in the previous post about how to prepare the budget. What we’ll discuss here is budgets that have an increase in the annual fees. Governing documents will usually have a cap on how much a budget can increase each year, anywhere from 5% to 20%. Ideally, association fees should increase each year to keep pace with inflation and to keep sticker shock down. Provided the Board of Directors does not exceed the allotted percentage increase, a budget can be adopted with little fanfare. However, there are times when increases need to exceed the percentage allowed by the documents. At this time, the membership will have to approve the increase at a meeting having a quorum of owners in attendance. But there are instances where these increases are allowable provided certain conditions are met-these conditions were put in place by State Legislatures to keep HOAs financially solvent.
We covered a lot here about annual HOA meetings. We’ll continue to discuss the annual meeting process and what you should expect, both as a Board member and as a homeowner.