HOAleader.com - Tip of the Week - July 16, 2021
Published: Fri, 07/16/21
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Annual Condo/HOA Report or President’s Report: What to Include and Avoid
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In this week's tip, we answer a reader's simple question: What should and shouldn't we include in an annual report?
Wait! You have to write an annual report?
As it happens, some states require condos/HOAs to provide an annual report to homeowners. But what to include? That's the question we got from our reader.
The Minnesota Common Interest Ownership Act does require annual reports, and the statute is very specific about what to include, according to Nancy T. Polomis, a partner at Hellmuth & Johnson PLLC in Edina, Minn., whose clients include local and national residential builders and developers and condos and HOAs throughout Minnesota.
It's 515B.3-106, if you're inclined to look it up. "It states that the annual report must be prepared by the association and a copy provided to each owner at or prior to the annual meeting," she says. "The report must contain, at a minimum, a number of things." Those include:
* A statement of any capital expenditures of more than 2 percent of the current budget or $5,000, whichever is greater, approved for the current fiscal year or the next two fiscal years
* A statement of the condo's/HOA's total replacement reserves, the components of the community for which the reserves are set aside, and the amounts of the reserves the board has allocated for the replacement of each component
* Revenue and expense statements for the association's latest fiscal year and an end-of-fiscal-year balance sheet
* A statement of the status of any pending litigation or judgments to which the association is a party
* A detailed description of the insurance coverage provided by the association, along with other insurance information
* A statement of the total past due assessments on all units for a specified period.
"That last requirement trips associations up," says Polomis. "They should be providing a total past-due assessment amount. They shouldn't be showing each individual account information."
California requires community associations provide some financial details, but not a full annual report, explains Andrea L. O'Toole, a community association lawyer for 15 years and the founder and shareholder at Andrea L. O'Toole PC in Lafayette, Calif.
Find out more about the requirements in California and other states, and read about the risks and rewards of having your president provide an annual report even if it's not required, in our new article: https://www.hoaleader.com/members/4357.cfm
Best regards,
Matt Humphrey
President
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