Washington HOA’s – Budgets vs. Assessments

HOA’s, depending on their size, can take on the appearance of mini governments – some have parks, rec centers, golf courses, operate wells or water systems, and may even run septic systems.

Each year, an HOA’s board of directors will adopt a proposed budget and present it to the residents for vote. The proposed budget will be deemed “approved” unless a majority of votes, or possibly higher percentage, vote it down. RCW 64.38.025. This form of adopted, unless rejected, might seem counter intuitive, but is a recognition that most HOA’s struggle to get enough residents to come to meetings to reach quorum, let alone approve a budget.

Once an HOA has an approved budget, the assumption is that each owner’s assessments would automatically follow – take the total budget and divide it by the number of lots. If assessments are quarterly or monthly, then further divide by 4 or 12, and you are done.

It isn’t necessarily that easy as an HOA learned in Casey v. Sudden Valley Community Association, 182 Wn.App. 315 (2014). HOA’s are usually nonprofit corporations and have Articles of Incorporation (“Articles”) and Bylaws, just as any other corporation would have. Being HOA’s, they also have CCR’s or CC&R’s – Covenants, Conditions, and Restrictions. Together, CCR’s, Articles, and Bylaws, are the HOA’s Governing Documents.

Sudden Valley’s Bylaws required a 60% approval of annual dues and assessments. To no surprise, residents repeatedly rejected efforts to increase dues and assessments. This resulted in a shortfall each year, with the Board having to adopt a spending plan to adjust budgeted expenditures to ensure that they did not exceed revenue.

To work around the impasse, the HOA’s Board argued that the statute governing budgets controls dues & assessments – take the approved budget, divide it by the number of lots, and that is each owner’s annual assessment. This attempt at an end run around the Bylaws, while logical, was rejected by the Court.

The key take away, read your Association’s Governing Documents. Even if there is a statute on point, the statutes will often defer to terms to the contrary in the Governing Documents.

This blog post is offered for general information and educational purposes only. It is not offered as legal advice and does not constitute legal advice or opinion. Although I intend to keep this information current, I do not promise or guarantee that the information is correct, complete, or up-to date. You should not act or reply upon the information in this post without seeking the advice of an attorney.

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