Often small homeowner associations fail to prepare a formal budget each year. These boards often believe they can simply continue to use the same budget on a continuing basis without formally adopting a new budget and without any negative consequences. The fact is, that even if a board decides to keep the assessments the same each year, it should adopt formal budgets each fiscal year.

Mortgage lenders that represent buyers, and owners wanting to refinance their properties, routinely request copies of the current budget as a prerequisite to making a loan. If there is no current budget, most lenders will reject otherwise acceptable loan applications. Those that will make a loan where no current budget exists, tend to demand higher interest rates because such loans are difficult to sell in the secondary mortgage market.

Updating your association's budget is not difficult. Your management company can assist you upon request. Generally, any cost is minimal.

When buyers cannot obtain a loan, or owners cannot refinance their property, due to the failure of the board to update the association's budget, the association is placed at risk that it will be sued for damages.