There have been rumblings in Condo World about cryptocurrency, i.e. digital money with no physical presence like coins or bills. A lot of people have made a lot of money by investing in it and seeing it double, triple or more in worth in a very short period of time. Good for them. Read the […]
The Pooled And Component Methods Of Reserve Funding For Community Associations (FL)
Florida law requires reserve funding for certain community association common elements. Condominium associations are required to fund reserve accounts for roof replacement, building painting, pavement resurfacing and any other item that has a maintenance expense or replacement cost exceeding $10,000. Fla. Stat. § 718.112(2)(f). Homeowners’ associations are required to fund reserve accounts for any item […]
Reserve Funding for Condo Associations: Options and Best Practices (FL)
Millions of Florida residents live in condominium units, be they stand-alone villas or penthouse units in a 30-story building. Irrespective, Florida Statutes section 718.112(2)(f) provides a default rule that condominiums must reserve fund balances to repaint, resurface the roads, replace the roof, and perform any deferred maintenance or replacement that costs more than $10,000.
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!” Read the entire article……………………………….
Surfside Towers Collapse Causes Tighter Maintenance and Capital Reserve Requirements for Associations (PA)
It has been about half a year since the terrible collapse of Champlain Tower South in Surfside, Florida. Because of this tragedy, condominium and homeowners’ association boards and owners have been concerned about the structural safety of their buildings. And now Associations are facing hard questions from mortgage companies concerning both maintenance and capital reserve […]
How Much Should Condo Associations Have in Reserves? (IL)
One of the most important indicators of building health is the state of the building’s reserves. Think of the reserves like the building’s savings account (as opposed to the operating fund, which is the checking account). The reserves ideally have all the funds for the building’s short to mid-term projects, and also sufficient funds to […]
Real Estate Matters: Discussion of how condo associations should structure reserves
Q: I’ve been reading your column about condominium reserves, and it’s made me think that most condominium associations should have higher reserves. Read the Q&A………………………………….
Condo questions: What are requirements for reserves under Florida law?
Q: My condominium is currently working on its 2022 budget. I know we have a reserve budget with multiple items. It looks like the replacement costs for several of the items on the reserve budget has skyrocketed. What are the requirements regarding reserves under Florida law and is there a possibility of lowering the reserve […]
Ask the HOA Expert: Proper Funding Levels
Question: Our HOA recently had a reserve study update which the board is evaluating to ensure that we are adequately funded. What is a proper funding level? I have heard numbers from “30% Funded” to “80% Funded”. Read the entire article……………………………….
How Condos Can Address Aging Infrastructure
Over many conversations in recent years, members of the Foundation for Community Association Research have identified aging infrastructures—the physical structures and the components within them that community associations rely on for residents’ safety and well-being—as a critical concern for association managers, boards, homeowners, and residents. Read the entire article……………………………….
The Basics of HOA Reserve Funds that Every Board Needs to Know
Every forward-looking director understands the importance of ensuring their homeowner’s association is healthy financially. But without a robust reserve account, accomplishing this task can be challenging. In addition, it would help if you had a reserve to take care of any future replacement and repair of primary assets. Read the entire article……………………………….
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. […]
Costly concerns: Addressing long-term maintenance and repair
The condo collapse in Surfside, Fla., has forced community association residents, board members, and managers to reevaluate long-term maintenance and repair, yet even before the tragedy, the concern for the longevity of essential components has been rising in recent years. Read the entire article……………………………….
Basics of an Association’s Investment Policy (CO)
Boards of directors and community managers rely on policies and procedures to guide community operations. The governing documents serve as the law of the land and the policies provide the roadmap. Each area of community operations likely has a corresponding policy to see that the board can make decisions fairly and efficiently. Just as covenant […]
Understanding HOA Reserve Funds (TX)
A homeowner’ association board has a role in ensuring its community runs flawlessly and with financial stability. However, the association may encounter a huge or unanticipated expense, such as a leak in the clubhouse roofing. If that happens, and the regular dues are not adequate to cover the unexpected expenses, the HOA’s reserve fund comes […]
The misplaced reservation about reserves (NH)
I have written in the past about the need for properly funded reserve accounts. But what happens if a board of directors doesn’t properly fund the reserves, and later tries to make up for the shortfall by specially assessing owners? Read the entire article……………………………….
Homeowner Association Reserve Fund (CA)
In many cases, the reserve funds are misunderstood by the members of the homeowners association, as well as the members of the Board. There are some that view the funds as a type of rainy day fund that can be used if the HOA runs low in funds, while others understand the necessity of the […]
Condo board leaders can help prevent the next Surfside-style disaster by setting aside more money
When people buy homes, they often focus on appearances – what realtors call “curb appeal.” When it comes to buying condominiums – privately owned individual units in a large property complex – I believe that Americans need to take other factors into consideration. Read the entire article……………………………….
What HOAs Need to Know about Reserve Laws
Following last month’s devastating partial collapse of the Champlain Tower South condominium in Surfside, Fla., many community association managers, boards, and residents are eager to understand state laws and regulations around reserve studies and reserve funding. Read the entire article……………………………….
What Community Associations Need to Know about Reserve Laws
Following last month’s devastating partial collapse of the Champlain Tower South condominium in Surfside, Fla., many community association managers, boards, and residents are eager to understand state laws and regulations around reserve studies and reserve funding. Read the entire article……………………………….
After Florida tragedy, condo owners are asking: Does my building set aside enough money for repairs? (MA)
Condo owners throughout New England were no doubt watching in horror as new details emerged about the deadly collapse of a 13-story condo building in South Florida. With the death toll expected to exceed 110, it may be one of the deadliest accidental building collapses in American history. How could such a thing happen? And […]
Hidden Damage – Life, Death, and Legislation?
When we first wrote on this topic twenty years ago, hidden damage—a cancer that can severely affect buildings but remain out of sight for decades—was primarily an economic problem. Community Associations found themselves deep in debt when the cost of repair of accumulated, but hidden, rot, corrosion, and other water damage, greatly exceeded cash reserves. […]
Breaking Point: Examining Aging Infrastructure in Community Associations
As buildings and their internal systems and physical components age, how can the com-munity associations that own them best prepare to meet the unexpected—but necessary—financial demands. (From the Foundation for Community Association Research) Read the report (PDF)……………………………………..
Can an Association Invest Its Capital Reserve Funds? (PA)
Has your Board, especially if it has a financial professional on it, ever looked with dismay at the low interest that a Capital Reserve Fund is earning? They may think that if they could get a better return on that Reserve Fund, then they could do more projects. Or they could reduce assessments. Read the […]
HOA Reserves | Statutory v. Non-Statutory (FL)
Like many other organizations, homeowner associations use reserve funds as a way to prepare for future expenses and hopefully to avoid having to levy a substantial special assessment to pay for capital projects. Unlike for condominiums, however, homeowner associations in Florida are not statutorily obligated, per se, to create, maintain or fund reserve accounts. Section […]
Condo questions: What funds can be used to paint the buildings if not on track? (FL)
Q: Our condominium has been reserving every year to repaint the buildings every seven years. We are now approaching seven years, and it turns out the paint reserve fund was never on track to be fully funded, and we are going to be short. Can we use money set aside for other projects or do […]
REAL ESTATE MATTERS: Homeowner concerned HOA has too much cash reserve
Q: Can a homeowners association have too much cash in reserves? If they do, what are the consequences? Read the Q&A……………………………..
When to Use the Reserve Fund
HOA boards dutifully save part of each year’s revenue in a reserve fund for the association. But, what exactly is this reserve fund for, and how can the board ensure it is used responsibly? In this article, we’ll look at the purpose of reserve funds and how the board can manage them effectively. Read […]
Tips to Allocate Reserve Funds
We’re currently conducting a reserve study for our community, part of which is still under developer control. How should we allocate the reserve fund contributions between the portion of the community that has already been completed and the planned build-out? Read the article…………………………
Association Funding Budgeting Assessments And Reserves (MI)
Association boards have a variety of responsibilities in administering the affairs of a condominium or homeowner association. Some of the most important responsibilities include ensuring that the association has sufficient funding to maintain, repair and replace items within the community, to carry insurance, and to maintain adequate funding for all of its obligations. To help […]
Distinguishing between Statutory and Non-Statutory Reserves under the Florida Homeowners’ Association Act
Considering the fiduciary responsibilities officers and directors have to the homeowners’ association’s members, it is important to understand not only the importance of including reserve accounts in an association’s budget, but also to understand when reserve funding is mandatory under the Florida Homeowners’ Association Act. Unlike condominium associations, maintaining fully funded reserve accounts is not […]
Condo World: Saving for a rainy day – Part II (NH)
Last time, I explained the duty of boards of directors to fund reserves properly for long-term capital repairs like paving, roofing and siding. As simple as that sounds, and as simple to accomplish, it’s surprising so many associations don’t have a proper reserve fund. Read the article……………………………..
To Reserve Or Not To Reserve and How it Impacts the Community (FL)
It is not uncommon for boards to try to keep assessments down especially during times like COVID-19. One way that a board can accomplish the “appearance” of keeping assessments down while still covering the day-to-day expenses is to waive or underfund the reserves. At the time, waiving or underfunding reserves may not seem like a […]
HOA Homefront: The reserve fund – how much is too much? (CA)
Q: Something has been bothering me for a while regarding the reserve funding level that is appropriate for a given association. Many associations strive (and set the dues) to achieve 100% funded. Do they really need to carry such high balances? Wouldn’t it be enough to carry only sufficient balances to meet the future projected […]
Condo World: Saving for a rainy day – Part I (NH)
Every once in a while I get a question from a member of a board of directors asking if it is a requirement that a condominium association properly fund its reserve account. I pause. I remind myself what they are really asking is if they can keep the condominium fees artificially low, and avoid saving […]
A Condominium Can Last Hundreds of Years, But Not Its Components (HI)
Dana Bergeman is the CEO of Bergeman Group, a local construction management company. He says many of Hawai‘i’s condominiums were built in the 1960s and ’70s and are reaching the point where they will need major infrastructure, cosmetic and architectural improvements to keep their value and remain liveable. Read the article……………………………….
Don’t Forget Reserves! (FL)
As budgeting season approaches, community associations must once again grapple with the continuing issues of reserves. Under ordinary circumstances, reserve funding increases the amount owners need to contribute to the association every month, since reserves are required above and beyond the association’s operating expenses. In light of the recent economic changes, reserves may be something […]
What Are Capital Improvements? Should HOA Fund Them?
What is capital improvement? How is it different from maintenance and repairs? These are two very common questions asked by homeowners. To understand where part of your monthly association dues goes, here’s what you need to know about capital improvements. Read the article……………………………
Does My Association Include Fully Funded Reserves in Its Proposed Budget? (FL)
With the budget season approaching, many condominium associations may wonder how to prepare a budget when it’s anticipated that members will vote to waive or partially fund reserves. The board must create a proposed annual budget that includes estimated revenues and expenses. In addition to annual operating expenses, Section 718.112(2)(f)(2)a, Florida Statutes, requires the proposed […]
Reserve Fund Investment
What would you do if you found out the treasurer of your community association had taken the money earmarked for reserves and bet it all on black at a roulette table in Vegas? You might be just a tad upset! Win or lose, gambling with the association’s future is risky and dangerous. It goes against […]
How to Build HOA Reserve Funds
A large responsibility of the HOA is to operate, maintain, repair, and replace all common areas within a development. Because these areas are available for use to everyone within the community, HOA funds are used for any expenses that may ensue. Read the article…………………………..
HOA Homefront: Are our reserves being handled properly? (CA)
Q: Is there a formula for the reserve funds that are necessary, or at least advisable, for a HOA? Also, can an assessment be collected from each homeowner and put in reserve and then returned to them after a reasonable time if it’s not needed? Read the article………………………..
How Do Well-funded Reserves Affect Your HOA? (NJ)
An HOA board has a duty to ensure that its community runs smoothly, and with financial stability. A well-funded reserve fund can affect many things, such as the ability to implement necessary repairs and upgrades, which ultimately affect the market value of the property. Market values can directly impact homeowners and whether or not they […]
What To Do If There Are Insufficient Reserve Funds
What are reserve funds and what are they used for? Reserve funds are broken down into capital and non-capital expenses; capital would be replacing a roof; non-capital would be painting. These are IRS terms really, but for HOAs reserves are in general a savings account saving up to take care of long-term repairs and replacement […]
Top issue facing associations is inadequate reserve funds (IL)
Q. What is the No. 1 issue facing Illinois associations? A. While there are many common issues facing associations, I would suggest that the top issue is deferred maintenance and inadequate reserves for capital expenditures related to repair and replacement of the common elements, or common areas. Read the Q&A……………………….
Condo Association Budget Season Tips: How to Cut Costs and Increase Your Reserves
One of the most important duties of the community association treasurer is to take the lead on reviewing and approving the annual budget. This annual duty is quite possibly the most important function of the treasurer. Typically, the draft recommended budget is initially prepared by the management company and then it is provided to the […]
Business judgment needed when budgeting for roofs (FL)
Q: Our condominium had a new roof installed following a recent hurricane. The roof was paid for by insurance proceeds and the cost to replace the roof seemed high because of the high demand at the time. We have a contractor giving us a price to replace the roofs today, and we have another owner […]
Benefits of Funding Capital Improvements for HOA Associations
HOAs need to be prepared for any unexpected expenses that come their way. At times, HOAs are not as organized with their finances as they should be. For this reason, many HOAs have issues related to financing any unexpected repairs that they are required to make. What happens as a result is this financial burden […]
Safeguarding Association Reserve Funds over $250,000.00 (OH)
Since the passage of the Ohio Condominium Act in 2004 and the Ohio Planned Community Act in 2010, Ohio’s community associations have been building reserve funds to repair and replace major capital items without the need for special assessments. Fortunately, many associations have built substantial reserve funds and are now more financially sound than ever. […]
The Case for Adequate Reserve Contributions | But… That’s all we can afford!
What’s better – $50/mo Reserve contributions (as part of your condo’s total monthly assessment) or $100/mo? All other things being equal, I’d rather pay the $50 monthly bill. Why would any board, able to set the budget at their association, choose the higher amount for the owners? Read the article…………………..