It is essential for board members to understand the different types of meetings and the rules surrounding how to properly and efficiently run them and what kinds of business are to be discussed at each meeting. Though it may sound simple, having a clear understanding of the differences between annual meetings and budget meetings will allow board members to be better prepared to serve their associations.
All meetings are membership meetings that should be conducted by the Board of Directors. Your community association manager is there to assist you by collecting ballots, answering questions, and providing you with all the information needed for a successful meeting.
In both North and South Carolina, most homeowners’ associations are considered nonprofit corporations and therefore are subject to their state’s nonprofit acts. Because of this nonprofit corporation designation, they are required to hold annual meetings. The business typically transacted at annual meetings is the election of board members and yearly budgets’ approval or ratification. It is important to note that the annual budget doesn’t have to be ratified at the annual meeting, but most associations choose to do it at this time for efficiency.
One of the most important things to keep in mind for the annual meeting is that it has to be noticed appropriately, meaning that you must let the membership know what items will be voted on at this meeting ahead of time in the annual meeting package.
Though annual meetings can take place at any time during the calendar year unless the association’s bylaws specifically dictate otherwise, the vast majority of them occur during the last quarter of the calendar year, and that is something Henderson Properties recommends. This is because it allows time to get billing out before the beginning of the new year once the budget is ratified or approved, and it also provides for new board members to get in place before the holidays and the new year. From September to November and even early December, it is suitable for an annual meeting, but waiting too late into December can cause billing to get overly complicated. This is because if budgets aren’t ratified or approved in time, and your assessments are billed monthly or quarterly, you may have to rely on the previous year’s budget for the first billing period even though assessments might be increasing.
The NC Condominium Act and the Planned Community Act require a budget ratification meeting for every Association created after January 1, 1999. The budget ratification meeting may be scheduled with the annual meeting unless your Bylaws specify otherwise.
At the budget ratification meeting, unless the budget adopted by the board is rejected by a vote of a majority (51%) of the total voting power of the association (or any larger percentage specified in the governing documents), the budget “is ratified.” In other words, the owners do not approve the budget—the budget is automatically approved unless it is rejected by a majority of the total voting power. Thus, if less than a majority of the total voting power is present in person or by proxy at the budget ratification meeting, it is legally impossible for the budget to be rejected, and ratification is automatic.
Once questions about the budget have been answered, if no owner has moved to reject the budget, the presiding officer should announce that the budget has been ratified, no motion to reject having been made. Alternatively, if less than a majority of the total voting power is present in person or by proxy at the meeting, making rejection legally impossible, the presiding officer should announce this.
It can be helpful to script out these words to be read at the meeting. The script can follow one of the following simple formats: (v1) PRESIDING OFFICER: “No motion to reject the budget having been made, the budget is ratified.” (v2) PRESIDING OFFICER: “Since a majority of the total voting power of the association is not present in person or by proxy at this meeting; it is legally impossible for the budget to be rejected. The budget is, therefore ratified.”
If a majority or more of the voting power present in person or by proxy votes to reject the budget, “or the required notice is not given,” then the previous budget remains in effect “until such time as the owners ratify a subsequent budget prepared by the board of directors.” This throws the process back onto the board to revise the budget or convince owners that the initially proposed budget is appropriate and should not be voted down. When the board is ready to seek ratification again, it should formally adopt the new proposed budget, then correctly notice and conduct a ratification meeting for the revised budget.
Even if your community uses proxies, you should do everything you can to get your members to attend the meeting in person. In-person attendees can be more active participants, ask questions, and hear the discussion being had first-hand.
The best way to boost attendance is to let members know about the meeting early. That way, they can block off that time on their calendar before anything else comes up. Often, the notice period will be specified by your community’s governing documents. If your documents are silent regarding the notice requirements, the Planned Community Act has a requirement of no less than ten and no more than 30 days before the meeting. We recommend sending notice 30 to 60 days ahead of the meeting via email blast or paper mailers as a “save the date” notice.
If your community has a regular newsletter, the date should also be prominently displayed in each issue, especially the date approaches. You can also get the word out through your community website and social media posts to groups on Facebook, NextDoor, and others.
If your homeowner’s association needs professional help, be sure to give our team a call!