Friday, May 06, 2005

Ohio bill says condominiums must reserve at least 10% of budget annually

The firm Kaman & Cusimano tells clients that the most significant provisions of Ohio's new condo legislation:

"specifies that “unless otherwise provided in the declaration or bylaws,” the board must adopt and amend budgets for revenues, expenditures, and reserves in an amount adequate to repair and replace major capital items in the normal course of operations, without the necessity of special assessments, provided that the amount set aside annually shall not be less than ten percent (10%) of the budget for that year unless the reserve requirement is waived annually by the unit owners exercising not less than a majority of the voting power of the unit owners’ association."

It notes that many HOAs don't have the reserves they need and they will have to increase home owners' fees:

"For many associations, fully funded reserves in accordance with a reserve study are going to cause a drastic, but necessary, increase in fees. If a board believes that fully funding the reserves will cause too drastic of an increase, it must send a letter and a ballot to each owner. The letter must disclose the amount necessary for fully funded reserves. This disclosure should mitigate any claims against the board by a future purchaser who gets hit with a large special assessment. In addition to disclosing the amount necessary to fully fund reserves, the board should indicate the lower amount the board proposes be put into reserves, and request ownership approval of the alternative, lower amount. A ballot should be included for the owner to sign and return. In the event the board fails to obtain majority approval for the lower reserve amount, the fully funded reserve must be implemented. Current bylaws dictate the date by which the board must have an approved budget for the following year. All balloting must be completed in time for the board to meet the required budget approval date."