Topic:
BUDGETS; CONDOMINIUMS;
Location:
CONDOMINIUMS;

OLR Research Report


June 11, 2008

 

2008-R-0354

CONDOMINIUMS-ANNUAL BUDGET-UNIT OWNERSHIP ACT

By: George Coppolo, Chief Attorney

You asked whether the Unit Ownership Act requires the adoption of an annual budget each year or permits the prior year's budget to be used if a new one is not adopted. Our office is not authorized to give legal opinions and this should not be considered one.

SUMMARY

Three different sets of laws govern condominiums, depending on when they were created. The Common Interest Ownership Act (CIOA) governs condominiums formed in Connecticut after December 31, 1983. The Condominium Act governs condominiums created from 1977 through 1983. The Unit Ownership Act governs condominiums created before 1977. But certain provisions of CIOA automatically apply to condominiums created under the other two laws and CIOA allows condominium associations created under the other two laws to adopt some or all of CIOA's other provisions.

We examined the Unit Ownership Act (CGS 47-67 to 47-90, Revised to 1975) and found no statutory requirement that the association adopt an annual budget each year nor statutory authority for using a prior year's budget without the unit owner's approval. But a condominium could have such provisions in its declaration or by-laws. If such a provision does not exist, a unit owner could attempt to amend the association's bylaws to either require the condominium association to adopt an annual budget or to authorize the board to use last year's budget without association approval.

On the other hand, the Condominium Act and CIOA require the association's board of directors to present a proposed budget to the unit owners for ratification. Thus, it would appear a board of directors of a condominium governed by one of these two laws can not unilaterally decide to use the last adopted budget once the period for which it was ratified has expired. Instead, the board would have to submit it to the association of unit owners for ratification.

If the association rejects a proposed budget for condominiums governed by CIOA, the law requires that the periodic budget last ratified by the unit owners be continued until the unit owners ratify a subsequent budget proposed by the executive board. But the law does not specify how soon the board must present another proposed budget.

CIOA, THE CONDOMINIUM ACT, AND THE UNIT OWNERSHIP ACT

Three different sets of laws govern condominiums, depending on when they were created. CIOA governs the creation, alteration, management, termination, and sale of condominiums and other common interest communities formed in Connecticut after December 31, 1983 (CGS 47-200 et seq.). The Condominium Act governs condominiums created from 1977 through 1983. (PA 76-308; CGS 47-68a to 47-90c). The Unit Ownership Act governs condominiums created before 1977 ((PA 1963, No. 605, July 10, 1963; CGS 47-67 to 47-115 Rev. to 1975).

Certain CIOA provisions automatically apply to condominiums created in Connecticut before January 1, 1984, but only with respect to events and circumstances that occur after December 31, 1983 (CGS 47-216). This statute does not make the provisions in CIOA relating to budget adoption automatically apply to condominiums governed by the Unit Interest Ownership Act or the Condominium Act.

We have attached a recent OLR report that describes the provisions of CIOA that automatically apply to condominiums governed by the Unit Ownership Act or the Condominium Act (http://cga.ct.gov/2005/rpt/2005-R-0348.htm).

The law permits condominiums created before January 1, 1984 to amend their governing instruments (declaration, bylaws, survey, or plans) to conform to portions of CIOA that do not automatically apply. Thus, a pre-CIOA condominium may adopt any CIOA provision it wishes. But the law requires that such amendments must be adopted in accordance with (1) the law that applied when the condominium was created and (2) the procedures and requirements the condominium's

declaration and bylaws specify (CGS 47-218). Thus, a condominium governed by the Unit Ownership Act could decide to be governed by the CIOA provisions dealing with the adoption and ratification of budgets.

ADOPTION OF CONDOMINIUM BUDGET BY CONDOMINIUMS GOVERNED BY THE CONDOMINIUM ACT

The Condominium Act requires that, notwithstanding any provision of the condominium instruments to the contrary, the board of directors:

1. give unit owners a reasonable opportunity to express their views concerning the proposed budget before its adoption or ratification either at the meeting of unit owners to adopt or ratify it, or on a day before the meeting; and

2. make available at least one copy of the proposed budget for inspection at the meeting (CGS 47-80a).

This does not explicitly require an association's board of directions to propose a budget each year. But it appears to impliedly prevent a board from unilaterally deciding to use the last adopted budget once the period for which it was ratified has expired. Instead, it appears that the board would have to submit the last budget to the association of unit owners for ratification if the board wanted to use the last budget again.

We were not able to find any court cases that have explicitly decided this question.

ADOPTION OF BUDGET BY CONDOMINIUMS GOVERNED BY COMMON INTEREST OWNERSHIP ACT (CIOA)

CIOA requires an association's executive board, within 30 days after it adopts any proposed budget for the condominium, to provide a summary of the proposed budget to all unit owners and set a date for a meeting of unit owners to consider ratifying it within 14 to 30 days after it mails or hand delivers the summary. (By law, “executive board” means the body, regardless of name, designated in the declaration to act on the association's behalf.) This duty applies notwithstanding any provision of the declaration or bylaws to the contrary.

At the meeting, or on any day before it, the board must provide a reasonable opportunity for all unit owners to express their views before the budget is ratified. At least one copy of the proposed budget must be available for inspection at the meeting.

The law specifies that the budget is ratified unless at the meeting a majority of all unit owners, or any larger vote the declaration specifies, rejects the proposed budget, whether or not a quorum is present. If the proposed budget is rejected, the periodic budget last ratified by the unit owners must be continued until the unit owners ratify a subsequent budget proposed by the executive board (CGS 47-245).

Just as in the case of the Condominium Act, discussed above, this CIOA provision does not explicitly require an association's board of directions to propose a new budget each year. But it appears to impliedly prevent a board from unilaterally deciding to use the last adopted budget once the period for which it was ratified has expired. Instead, it appears that the board would have to submit the last budget to the association of unit owners for ratification if the board wanted to use the last budget again.

We were not able to find any court cases that have explicitly decided this question.

GC:dw