How Much Should our Reserve Contributions Be?

By: Robert M. Nordlund, P.E.

There was a man with one foot in a bucket of hot water and one foot in a bucket of ice water. He was heard to state that "On the average, I feel fine." Having forewarned you of the risks of discussing averages, let me proceed.

Typically (that is a dangerous word), most community associations should be setting aside 20% - 25% of their assessments towards Reserves. Of course, this ratio does not apply to Planned Unit Developments (where each homeowner maintains their own home and the association only is responsible for some minimal common areas) and high rise buildings (with significant major mechanical components or significant administration expenses).

Another way to look at Reserve contributions is on a cash basis. We have found that in most metropolitan areas, "typical" community associations need to be setting aside somewhere between $25 and $50 per unit per month towards Reserves. Of course, with more common area elements the association will be at the higher end of the range. Small associations, with few members over which to spread even some minimal common area amenities (a spa, for instance) might also be at the high end of the range. Associations who have strong Reserve Funds, who are not playing "catch-up", can keep their Reserve contributions towards the lower end of the range.

So it all boils down to roughly $1 per unit per day. Not a big number worth fighting over or having big squabbles over. Even a rental car is $25 to $45 per day. The cost of maintaining the major components of your community association home are typically in the range of only $1 per unit per day. Pretty cheap, actually, when you look at it that way!


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