HOA Management Blog
As an HOA board member you probably know what a reserve study is and the importance of doing one. If you don’t, take a couple of minutes to read this blog to familiarize yourself with frequently asked questions about doing a reserve study in your homeowners association.
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 budgets crushed by emergency assessments because there aren't enough HOA reserve funds for repairs. They’ll likely call you as a board member to complain!
Why not avoid these situations altogether? Having HOA reserve funds readily available “just in case” offers you and your fellow homeowners financial peace of mind.
Each and every homeowner’s association should have a reserve fund as part of its budget to plan and prepare for future repairs and maintenance, as well as unanticipated expenses and needs. HOA board members are responsible to make sure a reserve plan is in place for the Association, or at least ask the question about how the Board is planning for the reserves. If the Board is ignoring the reserves altogether, then it needs to actively seek out assistance to make this happen.
As a homeowner or renter in a homeowners association, you know the importance of setting aside a little bit of money each month in case of an emergency. After all, you never know when you might have to replace an appliance or take your car to the mechanic. In order to effectively do this you’ve probably analyzed your budget and determined an amount that you can comfortably set aside each month so it’s there when you really need it.
How does the reserve fund in your homeowners association look? If your fellow HOA board members tend to look the other way, not want to deal with the reserves, or simply refuse to fund them, you’re not alone. Many Associations across the country aren’t saving enough in their reserves to make major repairs which can cause a multitude of problems. The community can fall into disrepair, you may be faced with having to enforce a special assessment on homeowners, or eventually losing control of the entire Association.
Your association board is planning for the big project on the horizon, and is currently reviewing how to finance it. For several reasons, you don’t believe you’ll have enough funds in the association’s operating budget or reserves to cover the project’s entire bill. What should you do? Split the project up over several years, levy a special assessment, or maybe get a loan?
Planning for future repairs and maintenance costs of common areas in the homeowner’s association is one of the most important jobs of an HOA board – and also one of the most neglected. Sometimes, boards are just short-sighted, focusing on the essentials that need to be done in the association now. While today is important, tomorrow must not be forgotten.
One issue that makes it difficult for boards to plan for the reserves is the pushback they receive from current homeowners because they have a hard time seeing how assessments for future projects will benefit them now. Learn how a reserve study protects owner value for both future and current homeowners in the association in the article excerpt below.
You have many responsibilities as an HOA board member that require you to make decisions and take action. Some of the most important decisions the Board of a homeowners association has to make are financial decisions. It’s challenging to try and remember what funds from the operating budget covers and what funds from the reserve budget will pay for.
There is always work to be done, especially in a homeowners association. It’s crucial that an HOA Board plan for general, ongoing maintenance and upkeep. This is important in order to keep the Association a safe place to live and keep it an appealing place to live. Members don’t want to live in a run-down neighborhood and potential buyers won’t give an Association a second look if it’s unkempt, dirty or in disrepair.
An area where a lot of HOA board members get into trouble relate to properly understanding the operating fund and the reserve fund in a homeowners association. If the two funds aren’t properly maintained a Board can be setting up the Association for failure and don’t even know it. It’s crucial that Boards understand how to use the operating fund and reserve fund, and use them correctly so they don’t find the Association in financial ruin.
