Every board member comes into their position with a dream of improving their community and with different ideas of what improvements are needed. While some capital improvements can be made at the board’s discretion, some require a vote from the owners.  So how do boards know when they need owner approval to make an improvement within their community?

     The governing documents in many community associations (more commonly condominium associations than homeowners’ associations) will stipulate owner approval is required for new never before seen existing capital improvements. When a board decides to make a capital improvement one of the first questions they need to answer is whether the improvement falls under the category of a new capital improvement or an existing capital improvement. New capital improvements are permanent additions or structures within the community that were not included as part of the community’s initial construction. Whereas, existing capital improvements would be the repair or replacement of an already existing structure, amenity or other physical asset of the association.  

How do you tell the difference between a new capital improvement and an existing capital improvement?

     Some improvements may fit neatly into one of these two categories. For instance, the addition of a new pool or gym would very clearly be a new capital improvement while the repair or replacement of a roof or fence would fall under an existing capital improvement.  

     Where some improvements have an obvious answer, others may fall into a gray area. Rebuilding a deteriorated fence may very easily be considered replacing or upkeeping a structure; but, if the new fence features a brand-new design or the association wishes to replace a decorative fence with a taller fence meant for privacy, the replacement may differ enough to be considered a new capital improvement.

Is a vote needed? (75% on New Capital Improvements)

     If the improvement falls within the new capital improvement category, a board may need to submit the capital improvement to a vote of the owners. If the sought-after capital improvement constitutes a new capital improvement, the board may need 75% of owner approval to carry out the job and pay for that expense.  Additionally, in some instances, an association’s governing documents may provide the board with the authority to make small, relatively lower costs, new improvements without owner approval. The price point of when a board will require owner approval is typically determined within the association’s declaration, so it is imperative to read your association’s documents carefully or to reach out to your association’s counsel before beginning a project that may constitute a new, never before existing capital improvement to ensure all the necessary procedural requirements, if any, are met.

If your association has questions or concerns regarding the use of reserve accounts for any capital improvement, please contact Williams & Strohm, LLC at 614-228-0207 and speak with one of our attorneys.