2006 Issue 1

BUDGET RATIFICATION PROCEDURES
By Lawrence Malick, Esq.

The Connecticut Common Interest Ownership Act (the “Act”) establishes some very particular rules for adopting and approving budgets.

Almost all common interest communities created since 1984 have a section in their declaration which reads more or less as follows:

Within thirty (30) days after adoption of any proposed budget for the Common Interest Community, the Executive Board shall provide a summary of the budget to all of the Unit Owners, and shall set a date for a meeting of the Unit Owners to consider ratification of the budget not less than fourteen (14) nor more than thirty (30) days after mailing of the summary.  Unless at the meeting a majority of the Unit Owners reject the budget, the budget is ratified, whether or not a quorum is present.  In the event the proposed budget is rejected, the periodic budget last ratified by the Unit Owners shall be continued until such time as the Unit Owners ratify a subsequent budget proposed by the Executive Board.

The language of this section is taken from Section 47-245(c) of the Act which makes this so-called “budget ratification” procedure mandatory for all communities created since 1984.

In fact, this procedure does not require that the Unit Owners “ratify” the budget adopted by the association’s executive board.  Instead, it gives them an opportunity to reject the budget if they don’t like it, but only by a vote of an absolute majority of all of the Unit Owners of the community, whether present at the budget meeting or not. 

How the Process Works

Here are some examples of how the ratification procedure works:

Example 1.       Windy Hills Condominium has 100 Units, each with an equal vote.  At the budget ratification meeting, 60 Units are present in person or by proxy.  Forty Units cast their votes against the budget and 20 Units vote in favor of the budget.  The budget is still ratified (not rejected) because the 40 votes against the budget do not constitute a majority of all of the voting power in the condominium. 

Example 2.       Again, 60 Units are present at the meeting in person or by proxy.  Forty-five Units vote in favor of the budget and 15 Units vote against it.  Once again, the budget is ratified (not rejected), not because a majority of the Units present voted in favor of the budget, but because the votes cast against the budget did not constitute a majority of all the votes in the association.

Example 3.       Eighty Units are present at the meeting in person or by proxy.  Fifty-three votes are cast against the budget and 27 in favor.  In this case, the budget is rejected because 53 votes constitute a majority of all of the voting power in the condominium.  

The Act contains no similar ratification/rejection procedure for special assessments.  However, in order to prevent the board from circumventing the provisions of Subsection 47-245(c) by adopting a special assessment, most documents require that all special assessments in excess of 15% of the current annual budget be subject to the same ratification/rejection procedure as the budget itself. 

Special Notice Procedures

Although the Act permits a budget meeting to be held in conjunction with an annual meeting or other meeting of the Unit Owners, the notice provisions for a budget meeting are somewhat different.  First, it requires that notice of the budget ratification meeting be given not less than 14 nor more than 30 days before the meeting is held, while notice for other meetings can be given not less than 10 nor more than 60 days.  Second, it requires that the notice of meeting include a summary of the budget.

It is a good idea to include a copy of the budget ratification section of the declaration in the notice of the meeting.  Most Unit owners do not understand how the ratification/rejection process works.  By including a copy of the ratification section in the notice, the association gives the Unit owners an opportunity to understand just what it takes to defeat a budget that has already been adopted by the board.

Let Unit Owner Know Ahead of Time

There is nothing in the Act that limits Unit owner involvement in the budget process to the ratification/rejection vote.  Many associations find it useful to hold one or more open workshops early in the budget process to give the board an opportunity to hear the wishes and concerns of the Unit owners and to give the Unit owners an opportunity to comment on the thoughts of the board, before the budget is presented for a vote.  It is also possible to circulate a draft of the budget for comment during the workshop process in order to begin informing the Unit owners of the board’s thinking and to encourage the greatest possible number of comments.

Larry Malick, Esq. is an attorney practicing with the firm of the Law Office of Matthew N. Perlstein.  Larry serves on the Publications Committee and is a frequent speaker at CAI-CT seminars.