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Annual Meeting Pointer: Does Your Budget Need Member Approval?

budget_smallAs a community association attorney, I attend numerous annual meetings each year for my community association clients. One of the most common mistakes that I see Boards of Directors make at these meetings is incorrectly assuming that the association’s annual budget requires membership approval and holding a vote to “approve” the budget.

In fact, for the vast majority of associations, the Board of Directors holds sole authority to approve the budget, so there is no need to hold a membership vote to approve the budget. Neither the Georgia Condominium Act nor the Georgia Property Owners Association Act requires that a community association hold a membership vote to approve the annual budget or annual assessment. 

Why the common confusion on this point? In my experience, for many associations, it stems from language in the governing documents that gives the membership the right to “disapprove” the budget adopted by the Board. This language frequently reads something like this: 

The proposed budget and the assessment shall become effective unless disapproved at a duly called and constituted annual meeting of the Association by a vote of a majority of the total association vote.”

Many Boards and association members incorrectly interpret this language referencing the owner’s right to “disapprove” the budget to mean that the Board is required to put the budget to a membership vote. To the contrary, this language and language similar to it simply provides the association members with the authority to call for a vote to disapprove the budget. However, it does not require that the Board put a vote on the budget on the annual meeting agenda, or hold any vote on the budget at all unless a member calls for a vote to disapprove the budget at the meeting. Under this language, if no member calls for a vote to disapprove the budget, then the budget proposed by the Board becomes effective. 

Importantly, community association governing documents vary as to whether and when membership approval is required for the budget and/or assessment. Some association governing documents, albeit a minority, do require that the membership approve the annual budget each year. Others require membership approval of the budget or assessment if it increases the budget or assessment by a certain amount over that of the prior year. Unfortunately, there is no general rule in Georgia. I encourage Boards of Directors to consult with community association counsel if they are unsure as to whether member approval is required for their association’s annual budget. Based upon my experience, many Boards who do so are likely to be pleasantly surprised that they do not need membership approval, and can thus remove this potentially time-consuming and unnecessary item from the annual meeting agenda.