Q: I am a one-bedroom homeowner. Our board will soon try to pass a budget requiring an 18 percent fee increase. The fee structure between the one- and two-bedroom units is not in compliance with our covenants. The one-bedrooms are currently paying 90 percent of the two-bedroom monthly fee rather than the 80 percent as specified in our covenants. This has been going on for possibly more than 20 years.
There are more two-bedroom owners than one-bedroom owners. Four of the five board members are two-bedroom-unit owners.
No voter ballots were sent out with the budget notice. The vote will be held at the management company office in the middle of a workday and not in the evening at our clubhouse. I was told that we could phone in our votes, e-mail them or write them on a slip of paper. The management company representative stated that 51 negative votes would be needed to stop the increase. Our covenants state that 51 votes of assent must be obtained to pass the increase. I would like to voice record or videotape the meeting, but I’m afraid doing so will create an ugly scene.
Can the board just ram this budget without majority homeowner approval, and how can we bring the fee structure back into compliance with the covenants?
A: Per NRS 116.31151, unless a majority of unit owners or any larger vote specified in the declaration of the association (covenants) reject the proposed budget during a meeting, the budget is ratified. In the reader’s case, the state law takes precedence over his governing documents.
It is important to note that the law states that there must be a meeting. NRS 116 requires associations to vote by mail on elections and removals of directors, but not the approving of a budget. You must attend a budget ratification meeting. No where in NRS 116 does state law mandate when meetings are to be held, i.e., during the day or the evening or weekday or weekend.
The fact that this meeting is being held at the management company’s office and during the business day is not illegal. For good public relations, meetings should be held conveniently as possible. It is becoming more and more difficult to find meeting places for board and membership meetings, but in this case there is a clubhouse where this budget ratification meeting could be held.
As to the comments that owners could phone in votes, e-mail them or write them on a piece of paper, those votes should not be accepted. The association could have included proxies with the copies of the budgets to the homeowners and could have allowed members to vote in person and by proxy at this ratification meeting. Please note that NRS 116 does not require the association to send a proxy to each owner for the ratification or rejection of the budget.
Finally, we need to address this fee structure. It appears from reviewing the copy of the covenants that was sent to me that the original dues set for the one-bedrooms was $480 a year and for the two-bedrooms $600 per year, hence the 80 percent relationship that the reader states was established by the covenants. The covenants then state that the association is allowed to increase the dues by a maximum of 10 percent above the annual assessment by vote or by written assent of the owners.
The covenants state that annual and special assessments shall be fixed at a uniform rate unless otherwise provided. In addition, special assessments are to be based upon the ratio of the square footage of the floor area of the living unit of the condominium to the total square footage of the aggregate floor area of all of the living units in the association. For example, if the square footage of the one-bedroom units represent 40 percent of the total square footage of the living areas of all of the units, then if there was a special assessment of $100,000, the one-bedroom units would contribute $40,000 towards that assessment.
In the budget notification newsletter to the homeowners, the association is asking the members to approve an assessment of $112.10 for the one-bedroom units and $118.50 for the two-bedroom units. Round off the numbers and the one-bedrooms would be at a 95 percent ratio as opposed to the 80 percent ratio from the original set assessments of the one- and two-bedroom units. The reader raises an interesting point that over the years, the increase in dues have not been consistent at the 80 percent ratio. Do the one-bedroom-unit owners receive a credit for the dollar differences or do the two-bedroom-unit owners pay additional assessments in order for equity to be achieved for the past years’ improper assessments?
I’ll let a court of law and attorneys fight over that question. What I would recommend is that the association makes the proper adjustments now as to the proposed 2008 assessments for the one- and two-bedroom units. This may require a new notification notice be sent to the homeowners to re-vote on the budget.
Barbara Holland, certified property manager, broker and certified association manager, is president and owner of H&L Realty and Management Co. Questions may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759. Questions may be shortened and are subject to editing.