The COVID-19 pandemic is changing the way we all do business. Homeowners associations and condominium associations are not immune to this new normal. Our firm has blogged extensively how to conduct association business during the COVID-19 crisis in order to promote social distancing and best stay compliant with the ever-changing status of the North Carolina Governor’s executive orders.
One question that continues to come up is how to ratify the association’s budget when holding a meeting seems impossible. The budget ratification process is dependent on several factors including when your association was established. For example, the Condominium Act process for budget ratification is retroactive and will apply to North Carolina condominiums established after October 1, 1986, as well as to condominiums established before that date unless the declaration expressly provides to the contrary. The statutory budget ratification process found in the Planned Community Act is not retroactive, and therefore will only apply to communities established after January 1, 1999. Planned communities established prior to the Planned Community Act must rely on the budget ratification process found in their governing documents. This blog will assume that your community is subject to the processes outlined via statue; however we strongly urge you to contact your community association attorney for the specific process that will apply to your association.
Both the Planned Community Act and Condominium Act state that within 30 days after adoption of a proposed budget, the Board shall provide a summary of the budget to the owners and set a date for a budget ratification meeting. Neither Act requires a quorum at this meeting. In addition, the Planned Community Act requires that the meeting notice include a statement that the budget may be ratified without a quorum present, although we recommend that our clients provide that statement regardless of whether they are a homeowners association of condominium association. Budgets are ratified under the statutes unless at the meeting a majority of the owners or any larger vote specified in the declaration reject the budget. Meaning the budget is approved unless more than half of all the owners show up to the meeting to reject the budget
But what if you physically cannot have a meeting of the members? Again, if the budget ratification meeting can be delayed until we return to a sense of normalcy in the world that would be ideal, because the budget ratification process could then be conducted at a physical meeting. However, depending on the specific language of your governing documents, we have advised clients to conduct budget ratification through the written ballot method under the Nonprofit Corporation Act (NCGS § 55A). As stated in the linked blog above, the Nonprofit Corporation Act provides that any action that can be taken at an annual or special meeting can be done without a meeting, as long as certain steps are followed:
- The association must “deliver a written ballot” setting forth the proposed action to every member
- There must be an opportunity to vote FOR or AGAINST the proposal
- The vote may be by electronic transmission, including electronic mail, as long as the electronic transmission sets forth or is submitted with information from which it can be determined that the electronic transmission was authorized by the member or the member’s proxy
- As many ballots must be returned as would constitute a quorum if a meeting had been held (note that no quorum is required to ratify a budget, so this requirement is inapplicable in the budget ratification scenario)
- The solicitation must indicate the date by which the ballot must be received back, and written ballots received after that date are not counted
- Written ballots cannot be revoked.
Unless a majority of all owners return ballots indicating the budget is rejected, it will be approved. Since the association will know how many votes it takes to reject the budget before ballots are mailed (a majority of the owners), we have advised clients recently that they may use the written ballot method if the absolutely need to have their budget ratified.
As this process is certainly different than normal and as there are other intricacies of the budget ratification statutes that were not discussed in this blog, you would want to involve your community association attorney. Should you need any assistance, one of our community association attorneys at Black, Slaughter & Black, P.A. would be happy to help.
The attorneys at Black Slaughter & Black are available to assist by phone, video-conference or email with any issues related to your community association throughout North or South Carolina. Please contact one of the attorneys at any of our four offices.
Author: Adam Marshall
Articles have been Reprinted with permission from Black, Slaughter, Black.
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