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posted: 3/1/2014 12:01 AM

Boards do not all have same budget deadline

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Q. Is there a deadline by when an annual budget needs to be prepared and approved each year by the board of an association?

A. The governing statutes empower boards to adopt an annual budget. However, they do not impose a deadline by which time a budget must be prepared and approved by the board. The association's declaration and bylaws should address this issue. The typical provision requires the board to adopt a budget by Dec. 1 of each year, and many governing documents provide for an earlier deadline.

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Q. What happens if a board does not adopt an annual budget?

A. It is not uncommon for governing documents to provide that assessments would remain at the level established by the prior year's budget if a board does not adopt a budget for the current year. This assessment amount would continue until the board does adopt a budget for the current year.

Q. It is March and our board of directors has not yet adopted a budget for 2014. A modest increase in our monthly assessment is anticipated when the board does adopt the 2014 budget. Would the assessment increase apply retroactively to Jan. 1?

A. When the board does finally adopt the annual budget for 2014, any increase in the assessment will be divided over the remaining months of the year.

Adopting an increased assessment amount payable retroactive to Jan. 1 offers a serious practical issue if units have sold between Jan. 1 and the date of the increase. That is, the association presumably issued an assessment status letter identifying the amount of assessments due, or that assessments were paid to date, as of a certain date. The association could not now go back, with respect to those sold units, and bill the increased assessment amount for the dates covered by the assessment status letter. Spread the assessment increase over the remaining months of the year and problem solved.

Q. There are two seats on our board that are up for election at the upcoming annual meeting. Is there a limit on the number of owners who can run for the board?

A. There is no limit as to the absolute number of owners who can run for the board at any one time. However, in a condominium or common interest community association, if there are multiple owners of a unit, only one of the multiple owners may serve on the board at one time. Implicitly, only one of the multiple owners of a single unit could run for the board at any one time as well. You should also look to the association's governing documents to see if there are any restrictions as to eligibility to run for the board.

Q. A new member of our association's board insists he has a right to contact the association's attorney whenever he wants. In the past, all communication with counsel go through the president or property manager. What is the protocol here?

A. The standard in the industry is that association counsel communicates with and accepts instructions from the board of the association through the president and the property manager only, unless and until directed to the contrary by the board. This includes phone calls, letters and emails. The consensus of the board on an issue requiring involvement by counsel should be funneled through the president or property manager only. This helps avoid misunderstanding as to the board's instructions, and unnecessary attorney's fees that arise from communications with multiple board members. This protocol should be set out in the engagement letter between the association and the association's attorney.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in Buffalo Grove. 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.

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