Law & Logic of Homeowner Association Capital Reserves
own, their homes. These people have the right to expect the homeowner association to be run like the business that it is...a corporation often responsible for millions of dollars in assets.
The reserve study concept was developed during the 1980s as a result of the many aging homeowner associations that found themselves in dire straits due to failure to plan for reserve expenses. The homeowners expected the Board to plan for such events and all too many had no plan other than "dealing with it" when the time came. Well, those "times" came all too soon and inevitability lived up to its reputation. Thus, the obvious need for long range planning came about.
Reserve studies analyze and predict the cost and timing of future repairs of association maintained components like roofing, pools, paving, landscaping, painting, fences, decks and other items that have a useful life of between 3 and 30 years.
The typical condominium association has between 15 and 30 items that fall under the "reserve" definition. When the repair costs of these 15-30 items are added up, it usually amounts to hundreds of thousands, even millions of dollars. This is not chump change. It takes careful planning to accumulate the funds plus know how and when to spend it. That's what reserve planning is all about.
Reserve plans require all owners to pay a monthly share of future repairs and replacements. These payments pay for assets that are being used up. If an owner sells, the next owner picks up the monthly share. All owners pay a fair share and no more special assessments! This is as it should be. If you've been thinking there's a better way to manage association assets, there is: It's called a Reserve Study. Whether by law or logic, it's time your homeowner association started doing business like a business.
The reserve study concept was developed during the 1980s as a result of the many aging homeowner associations that found themselves in dire straits due to failure to plan for reserve expenses. The homeowners expected the Board to plan for such events and all too many had no plan other than "dealing with it" when the time came. Well, those "times" came all too soon and inevitability lived up to its reputation. Thus, the obvious need for long range planning came about.
Reserve studies analyze and predict the cost and timing of future repairs of association maintained components like roofing, pools, paving, landscaping, painting, fences, decks and other items that have a useful life of between 3 and 30 years.
The typical condominium association has between 15 and 30 items that fall under the "reserve" definition. When the repair costs of these 15-30 items are added up, it usually amounts to hundreds of thousands, even millions of dollars. This is not chump change. It takes careful planning to accumulate the funds plus know how and when to spend it. That's what reserve planning is all about.
Reserve plans require all owners to pay a monthly share of future repairs and replacements. These payments pay for assets that are being used up. If an owner sells, the next owner picks up the monthly share. All owners pay a fair share and no more special assessments! This is as it should be. If you've been thinking there's a better way to manage association assets, there is: It's called a Reserve Study. Whether by law or logic, it's time your homeowner association started doing business like a business.
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