Q: Our treasurer continues to represent that our reserves are fully funded, but the balances seem low. When I reviewed a copy of the budget, there are varying annual contributions and a balloon for the roof in 15 years. Is this fully funded? Read the Q&A……………………….
HOA Homefront Q&A: Investing, growing and withdrawing reserve funds
Q: I am a member of my HOA board. Our prior management company had done all of our investments (from our direction) for our reserve funds. FDIC insured CDs were used as we understood that they were required by California law. We saw that the interest rate income from FDIC insured funds did not cover […]
HOA Homefront – Spending reserve account interest, disclosing reserves electronically (CA)
Association should be setting its budget so that its regular assessments meet anticipated expenses. Siphoning reserve income to subsidize the budget obscures the fact that an association budget is inadequate. Read the Q&A……………………..
HOA Homefront – What amount in reserves does the law require? (CA)
Q:Is there any legal requirement for the reserves to be at any levels or is it a recommendation by the state? Can a homeowners association be taken over by the state if it is underfunded and if so, at what percentage?Read the Q&A………………………..
Financial Management of Community Associations | Budgets and Replacement Reserves -Part 4 : Reserve Account/Reserve Funds
The reserve account consists of funds put aside in “reserve” for the replacement of major components of a community’s common property (aka “assets”). Typically the reserve account is used to replace asphalt paving, concrete sidewalks, roofs, central heating and cooling plants, swimming pool, tennis courts, elevators, and many other property components. Revenue raised for adding […]
Condominium Associations Can Borrow Money (FL)
Q: My condominium association board recently said it is considering replacing all of the roofs on our buildings and taking out a big loan pay for it. Don’t unit owners have to vote on this? Read the Q&A……………………..
Why Does Your HOA Need Reserves?
Equipment and major components (like the roofs) must be replaced from time to time, regardless of whether your association plans for the expense. We prefer to plan and set the funds aside now. Reserve funds aren’t an extra expense—they just spread out expenses more evenly. Below are other important reasons we put association monies into […]
Financial Management of Community Associations | Budgets and Replacement Reserves
What is a Budget? A budget is an annual financial plan for an organization – in this case, a community association. A budget provides an estimate of a community’s revenue and expenses for a specified period of time. It is the first step in managing your community’s financial operations. Read the article………………….
Capital Reserve Funds – How Much Do You Really Need?
As community members, co-op and condo owners work together to maintain the greater structure in which they live – not just their individual units. Major systems – things like boilers, roofs, and facades – are expensive to maintain and repair, but each has a standard useful life. Thus, boards and managers should be diligent to […]
Capital Reserve Funds – How Much Do You Really Need?
As community members, co-op and condo owners work together to maintain the greater structure in which they live – not just their individual units. Major systems – things like boilers, roofs, and facades – are expensive to maintain and repair, but each has a standard useful life. Thus, boards and managers should be diligent to […]
MCL 559.201 and MICH ADMIN R 559.511: Is Your Reserve Fund Underfunded? (MI)
In Michigan, the laws related to the governance of the formation and operation of condominium projects are found in the Michigan Condominium Act (the “Act”), MCL 559.101, et seq. MCL 559.205 of the Act requires a condominium association to maintain a “reserve fund,” to be set aside for major repair and replacement of the common […]
Does Your Association Have Adequate Replacement Reserves?
Physical deterioration occurs at every community association with the same certainty that the sun rises every day! This inevitable phenomenon begs the one important question for boards and managers: Read the article…………………..
When to Use Your HOA Reserve Fund
This article is the third in a series on reserve studies. In the first article, we discussed what a reserve study is and why conducting one is important for the financial health of your association. We also provided basic information to help you obtain a reserve study. We’ll discuss the difference between the reserve fund […]
Planning for the Future of Your Community Through Reserve Funding (NC)
As properties within homeowners and condominium associations age, inevitably maintenance expenses will begin to pile up. Roofs will need to be replaced, deteriorating roads will need to be repaired, and siding may need to be replaced. These are examples of major expenses that do not occur every day, but can often otherwise be anticipated. Planning […]
4 Benefits of Well-Funded Reserves
Managing an association’s finances and creating budgets that allow a community to preserve market values are key responsibilities for the board of directors. It’s essential that a board budgets for the future repair or replacement of major components in a community reserve fund. An up-to-date reserve fund is critical to the financial management of a […]
Condominium Reserve Accounts (WI)
For a condominium community, the best way to prepare for that inevitable expensive repair is to have a reserve fund. Otherwise, when those big ticket repairs need to be made – like replacing roofs or concrete areas – there will be no money to pay for them, and every unit owner will receive a walloping […]
Can the Reserves Be Adjusted for Items Costing More Than Planned For?
Picture yourself in this scenario: The clubhouse needs a new water heater and it will cost $10,000. But all prior reserve studies that have been done in the association have only allocated $6,000 for replacement. What are the board’s options to make up the additional $4,000 difference? Read the article…………………..
Procedure to convert to pooled reserves (FL)
Q: Can a condominium association board vote to convert from straight-line reserves to pooled reserves without a membership vote? Read the Q&A……………
Why Reserves? If We Have a Surplus, What Then?
Q: I am the attorney for several community associations, and there are two questions I am always asked. Why should we budget for reserves? How much reserves do we need? Is there any legal requirement as to the amount of reserves we should keep? Where can we invest these reserves? If the association is successful […]
Solid Advice On Reserves for your Condo or HOA
Although our expertise is in community association collections our team are experts in financial management, and after all when we recover association funds there are things you should know. So here are some commonly asked questions and answers that we get from boards of directors regarding reserves: Read the article………………
Can a Board Use Reserves for an Item Not Listed in the Reserve Study? (CA)
The purpose of the reserve fund is to plan for future repairs and replacements in the association. But what about components that you can’t see and aren’t listed in the reserve study? For example, plumbing supply lines that aren’t included in the reserve study and will end up costing somewhere in the ballpark of $50,000 […]
Reserve Funds For An HOA
Reserve funds are an important part of the HOA Boards financial responsibilities. And how HOA’s collect that money is through monthly dues provided by members. A small chunk of monthly dues goes into a reserve fund or a major backup fund that is used for unexpected costs. The amount varies, but what is consistent is […]
When Misguided Attempts to Keep HOA Fees Low Affect the Reserve Fund
The reserve fund of a homeowners association is often misunderstood by members and sometimes the HOA board as well. Some see it as a slush fund that is to be used on a “rainy day”‘ when the association gets low on cash in the operating account. Others, although they may understand the need to have […]
Put That Budget Surplus to Work (NY)
Having too much money is a problem most co-op and condo boards would love to have. But it’s important to deal with a windfall wisely. In the past, if a co-op showed a profit in a given year, it would be able to offset that with depreciation. But we’re reaching the point in 2018 where […]
Why Do So Many HOAs Fail To Properly Plan For Predictable Expenses?
A fortune teller asked me to gaze into her crystal ball. “I see wear and tear in your condominium’s future. I see a new roof will be needed. I see cracking paint and asphalt in need of repair. I see (gasp!) no money to pay for these things!” It doesn’t take a fortune teller to […]
How Much Should Our Association Have in Reserves? Fully Funded, Partially Funded or Under Funded is the Better Question.
One of the most widely asked question by the condo community association board Treasurer is how much should be in the reserves. Another typical question which is essentially the same is “How much should our association put away into the reserves as a part of our annual budget”? The answer is far from simple especially […]
6 Tips for Making the Most of Your Hawai’i Association’s Reserve Study
For a community to last for generations, its major components – like elevators, clubhouses and swimming pools – all need major maintenance or replacement eventually. The funding for these capital improvements comes from putting a portion of the community’s money into a reserve fund determined by a reserve study. It is more than just another […]
Eliminate the Risks of Not Having Adequate HOA Reserve Funds (CA)
The risks of not having enough HOA reserve funds for your community are as serious as the risks of not having enough emergency savings for your family. Imagine needing to pay for college tuition increases or costly medical expenses without having enough money set aside to do so. Now imagine fellow homeowners having their family […]
HOA Reserve Conundrum
A conundrum is a riddle or puzzle. Many homeowner associations established over 30 years ago now face the conundrum of replacing common elements they were not planning for nor have the money to pay for. While HOAs commonly have responsibility for the replacement of roofing, things like plumbing, wiring, siding, concrete and streets are often […]
Picture Perfect Reserves In Your HOA
A reserve study identifies a homeowner association’s future repairs and replacements like a snapshot in time. Imagine that you could picture the buildings and grounds as they would be in five, ten, even thirty years. A reserve study acts just like that by estimating the useful life of the common elements and the cost to […]
Picture Perfect HOA Reserves
A reserve study identifies a homeowner association’s future repairs and replacements like a snapshot in time. Imagine that you could picture the buildings and grounds as they would be in five, ten, even thirty years. A reserve study acts just like that by estimating the useful life of the common elements and the cost to […]
Community Next: Homes of the Future
Community Next: Homes of the Future is the latest milestone in CAI’s Community Next series, which offers industry insight to empower community association volunteers, managers, and business partners with a strong understanding of how to preserve, protect, and enhance common-interest communities. This Fall 2017 report will provide you with a better understanding on topics like: Integrated technology Government […]
Earmarking Reserves In Your HOA
Most homeowner associations are entrusted with substantial common elements which must be maintained, replaced or renewed. All of this costs a lot of money. Borrowing said money is a very bad idea because it comes at a very high price in the way of interest and fees which must be repaid along with the principal. […]
Why Does Your HOA Board Need to Maintain Reserve Funds?
You probably receive your HOA’s annual budget for review and notice the line item called “reserve fund.” You probably wondered: why does the Board need to maintain reserve funds? Well, this post will answer that question for you. Let’s start with a few basics. Read the article…………….
Inadequate Reserves: The Risks of Not Keeping Up
There are few feelings worse than encountering an unexpected expense and finding the piggy bank empty. That is why reserve funds and reserve studies are such important elements in the financial well-being of co-ops, condos and homeowners associations. It pays to keep a close eye on those numbers and adhere to the planning available through […]
Funding Your Future: Predicting & Budgeting Your Association’s Repairs & Improvements
All community associations require routine maintenance, repairs, and replacement over time to ensure they remain in good condition. The task of ensuring the Association retains sufficient funding to pay for this maintenance, repair and replacement work falls squarely on the shoulders of the Board of Directors. Balancing the Association’s financial and maintenance needs is a […]
HOA Homefront: Can we skip the reserve account?
Dear Mr. Richardson: I am wondering, are HOAs required to have a “reserve” account or it is just recommended? Read the Q&A…………….
Protecting That Nest Egg Called the Reserve Fund
Is an investment-policy statement right for your board? Like any co-op or condo board, you keep a reserve fund for capital projects and emergency repairs. In fact, the New York Cooperative Corporations Law requires that boards “periodically set aside reasonable sums for reserves,” while the Reserve Fund Law requires it of buildings converting to condominium. […]
The Homeowner Association’s Future Forecast
Preparing for and overseeing a homeowner association’s finances are perhaps the most important board responsibilities. It takes money and careful planning to maintain and preserve common area property. One of the best forecasting tools is a “reserve study” is needed to identify common element components, their useful lives and cost of repair or replacement. Unlike […]
Best practices for condo boards to plan for future building repairs
Q: We live in a condo building of 56 units. We have a reserve fund marked for separate items like the elevator, roof, parking lot, painting, etc. If we didn’t have enough money to replace the elevator, can we use some of the money from the roof reserve fund? Read the Q&A…………..
Funding Reserves For the Common Good
Subdivisions, planned community, and condominium owners are different types of community and offer different types of amenities and surrounding. However, there is one common denominator that people living inside these communities are obliged to conform with to ensure the common good of everybody while accessing or using the amenities of the community, and that is […]
Appeals court decides Centex must pay into HOA reserve (FL)
The 5th District Court of Appeal recently decided in favor of a pair of homeowners representing themselves in a case against their homeowner association at Sullivan Ranch. According to a report by the Orlando Sentinel, Sara MacKenzie, who had only practiced law for a short time after successfully earning her law degree in the 1980s, […]
Reserve Funding for On-Site Managed Communities
Increasingly reserve funding has become more and more important in validating the community association operations and their management. All on-site managed communities whether they are Luxury Condominiums, Large-Scale On-site Managed Communities or Active Adult communities should have reserve funds with suitable reserve studies backing the funding levels. On-site managers are trained to be aware of […]
Court Decision Clarifies HOA Developer Reserve Funding Obligations (FL)
Last month, Florida’s Fifth District Court of Appeals issued yet another opinion in Mackenzie v. Centex Homes, by Centex Real Estate Corp., Case No. 5D16-1254 (Fla. 5th DCA, December 22, 2016) reinforcing that a developer is obligated to contribute money to an association’s statutory reserve accounts prior to turnover, even when the developer has chosen […]
What are pooled reserves and how do we implement them?
Q: I am a new director on my condominium association board. At a recent board meeting, there was a discussion about switching to “pooled” reserves. What are pooled reserves and what does the association have to do to implement pooled reserves? Read the Q&A…………..
Funding Your Reserves: Banking Against Surprises
Bill and Martha Jensen bought a new condominium in Brockton in 1995 and lived there for 19 years. In 2014 they sold the unit to Max and Rita Diaz. A year later, the condominium association’s board of directors voted to replace the building’s roof and imposed a special assessment to pay for the project. “That’s […]
Condos Must Reserve To Preserve — And Get Loans
The recent front page Washington Post article on the financial problems condominiums are facing prompted me to write this column about the absolute necessity of maintaining adequate reserves. And it is especially timely since associations are starting to prepare next year’s budget. Every community association should have money set aside “in reserve” to cover the […]
Real Estate Condo associations should build up reserves for a rainy day
A recent front page article in The Washington Post on the financial problems many aging condominiums in the Washington area are facing prompted me to write this column about the absolute necessity of maintaining adequate reserves. Boards of directors can’t control when personal financial problems force owners into default and foreclosure, reducing the condo’s source […]
Budgets & Reserve Studies: Your Best Planning Tools
As the summer months are winding down, TV commercials for school supplies abound and parents are overjoyed with soon-to-be quiet households. It truly is a wonderful time of the year – unless you work in property management. For property managers, this time of year is the most dreadful. If your association is on a January […]