The budget, and how it is ratified
How an association’s budget is built, what ratification actually means, and why a reserve study is the most important document most owners never read.
How the budget is built
The board, usually working with the managing agent and a finance committee, drafts a budget for the coming fiscal year. It has two halves.
- Operating — what it costs to run the property for a year. Insurance, utilities, landscaping, cleaning, management, repairs, legal and accounting, reserves for small recurring items.
- Reserve contribution — money set aside now for the large replacements that are certain to come later: the roof, the siding, the elevator, the plumbing, the paving.
The total, divided among the units according to the allocation in the declaration, is what each owner’s regular assessment becomes.
Ratification, and why it surprises people
In Washington the board adopts the budget and then sends it to the owners with notice of a meeting to consider it. What happens next is counter-intuitive and worth understanding.
It is a veto, not an approval
Under the usual statutory mechanism the budget is ratified unless owners holding the specified share of the votes reject it. Silence ratifies. A meeting where nobody turns up ratifies the budget. Owners do not need to vote it through; they need to muster a rejection to stop it.
What happens if it is rejected
The previous budget generally continues in force until the board proposes one the owners do not reject. That is a fallback, not a solution — the previous budget was written for last year’s costs.
What to do with the notice
Read it when it arrives, not when the assessment changes. The ratification meeting is the point at which an owner has actual leverage over the number; afterwards there is a lien and a payment schedule.
The reserve study
A reserve study is a professional assessment of every major component the association must eventually replace: what it is, what condition it is in, how long it has left, and what replacement will cost. It produces a funding plan.
- It is updated periodically, with a full site visit less often than a numbers-only update.
- It drives the reserve contribution in the budget. A board that underfunds reserves is not saving owners money; it is deferring a special assessment onto whoever owns the unit when the roof fails.
- Percent funded is the number to look at. It compares what is in the reserve account against what the study says should be there by now.
- A prospective buyer’s lender may ask about reserve funding, and a poorly funded association can affect financing and resale.
If you read one financial document your association produces, read the reserve study. It is the closest thing to a forecast of your future assessments.
What to look at in the financials
- Operating variance — where actual spending is running against budget, and why.
- Delinquencies — how much is owed and how old it is. Rising delinquency is an early warning.
- Reserve balance against the study’s schedule.
- Insurance as a share of the budget. It has moved sharply for Washington associations in recent years and is a common cause of a large increase that looks inexplicable otherwise.
This guide describes how homeowners associations generally work in Washington. It is not legal advice and it is not specific to Queen's Court Owners Association. Where it says what is typical, this association’s own recorded declaration, bylaws and rules decide what is actually true — and where the two differ, the recorded documents control.