Reserve Right to Revise Budget
Does your board have the authority to revise the annual budget midyear, if necessary, to pay unexpected expenses? Check your bylaws, and if your board doesn’t have this authority, consider adding a bylaw so that it will in the future. The board needs this authority so that it doesn’t find itself in the position of either having to convince the members to approve a special assessment (if the governing documents require a member vote for special assessments) or having to run the association on less money than is necessary. The need to revise an annual budget midyear to increase the monthly assessments comes up most frequently when expenses have gone up unexpectedly. For example, it could be the result of a winter of unusually high snowfall, or an unanticipated hurricane or tornado.
Usually, when bylaws suffer from this error, it’s because the bylaw is silent on the issue. When this is the case, the exact language of the governing documents is controlling. If the declaration or bylaws say that the annual budget is done only once, the board may need to consider less financially efficient options, such as borrowing the necessary funds. Or it might have to shut down amenities or postpone needed repairs. Ask your association’s attorney about adapting this Model Bylaw Language, which gives a board express authority to revise the budget midyear, if necessary:
Model Bylaw Language
Midyear Budget Revision: If the Board, in its reasonable discretion, deems it necessary at any time during the course of its fiscal year to adjust or modify the Annual Budget it had previously adopted to enable it to meet the obligations of the Association and to continue to operate the Community properly, consistent with its function and responsibilities, it may do so, and copies of the revised Budget, and the revised assessments resulting therefrom, shall be sent to all Members.