For many, the start of fall marks the hope of cooler temperatures being near, but for POA community managers and board members that is another story. September means the heat is really cranked up with the stress of budget season falling upon the POA industry. The requirements on how the budget should be set depends on a number of factors in both the Texas Property Code and the governing documents of the specific association. In this article, we detail the requirements found in Chapter 82 and Chapter 209 of the Texas Property Code, the roles and responsibilities the Board plays, and how preparing for the future could save potential heartache in the years ahead.

Chapter 209

Chapter 209 of the Texas Property Code is straightforward concerning budgets. Section 209.0051(h)(10) states that the approval or approval of an amendment of the annual budget is one of the 15 items that must be voted on during the open section of a properly noticed and called board meeting. It is important to note that the discussion on how the budget is achieved does not have to be done in an open session of a board meeting. Further details on achieving the budget are discussed in the roles and responsibilities of the board section below.

Chapter 82

Chapter 82 is more specific than Chapter 209 in how the budget affects the association’s assessment. Section 82.112 titled Assessments for Common Expenses details that after a condominium association makes an initial assessment, assessments must be made at least annually and must be based on a budget adopted at least annually by the association. Unlike associations governed by Chapter 209, condominium associations governed by Chapter 82 do not have a requirement to approve the budget during the open session of a board meeting, but it is recommended to do so nonetheless.

The Roles and Responsibilities of the Board

So where does the Board come in when adopting a budget? The Board is responsible for crafting the budget many times with the assistance of the association’s management company team. One of the most effective ways to craft the budget is to get the Board together and host a budget workshop. A workshop allows for an open discussion of the budget goals and free flow of ideas, without the formality of a meeting. When hosting a workshop, the Board must remember there is only to be discussion, no voting. A few examples of the types of discussion the Board could have at a workshop include:

• “Let’s focus on updating our entrance landscaping.”
• “I want to expand our recreation center.”
• “We’ve increased assessments the last two years; do we need to dial back on our expenses.”

If the Board chooses to use a workshop, the key to its success is its transparency to the membership. This could involve allowing homeowners to participate in a portion of the workshop, having a committee of homeowners separate from the Board join the workshop, or another form of participation to ensure the membership is given the benefit of the discussion. This is key to staying ahead of the narrative, especially one on social media.

With the workshop done and budget ready to be presented, does the Board then have the final say? It depends. Each association will be different depending on what is outlined in the dedicatory instruments. For some associations, the budget only needs to be approved by a vote of the Board. For others, it may be required to have a vote of the members.

Then, there is the timing aspect of the vote. Can the vote occur at a regularly scheduled board meeting? Can a special meeting be called just for the purpose of adopting the budget? Does the vote have to occur at the annual member meeting, and does the vote have to occur by a certain date in the year? Again, all of the answers should be outlined in the dedicatory instruments. For questions on what is required under the dedicatory instruments, Boards should consult with their legal counsel to ensure they are in compliance and following the documents correctly.

The Future

Along with setting the funds and spending plans for the year, a responsibly adopted annual budget helps prepare the association for the future. The budget prepares the association for the potential need to raise assessments as costs on items such as landscaping, pool service and insurance rise, while continuing to fund a reserve. For some associations, reserve funding is a requirement in the association’s dedicatory instruments. By using budget planning tools, such as reserve studies, Boards are able to effectively manage assessment increases and maintain the increases to low single digit percentages, all while funding the reserve for the eventual roof or pool pump replacement, or other common area expense that could require a shock double digit percentage assessment increase, or special assessment. By being fiscally responsible, the Board is not just maintaining harmony in the community but is able to withstand any potential unseen regulation that may arise in the years ahead.

Austin and San Antonio friends of RMWBH, beat that budget season heat and join us for a Beat the Budget Season Social. On September 12, Paul Gaines will be leading the way in San Antonio with tips on how to beat the budget season heat. On September 13, Clint Brown offers a cool down from that heat in Austin. Each social is from 4:30 – 6:00 with a special prize drawing that you must be present to win.