Adequate Reserves – (Finally!) Defined
A Reserve Study helps you to anticipate and prepare for repair and replacement expenses at your property. All buildings begin to physically deteriorate the moment they are completed, making the need for repairs not a question of if but when? This is where a Reserve Study comes in, turning these projects into predictable expenses, rather than a financial surprise.
If you serve on the Board of an Association-governed community or oversee the long term viability of a church, school, private club or municipality, the least expensive approach is to set aside funds on an ongoing basis in advance of the inevitable repairs & replacements. A Reserve Fund provides the capital for these projects.
As we look towards the final months of this year, it’s time to begin planning for 2020 and consider the important role of HOA Reserve Studies. Should your association-governed community be conducting them? If you’re not currently doing so, why not? What has brought your Board of Directors to this decision?
The rationale behind a decision not to have an HOA Reserve Study prepared, or to ignore annual Reserve Study updates, may no longer be valid. Setbacks in the past that may have included insufficient funds, special assessments, or deferred maintenance, reveal consequences of underfunding that need to change and greater control over reserve planning may now be imperative.
A Reserve Study is a tool to analyze and assess the physical health of any property. In the case of Association-governed communities like condos, co-ops, HOAs, OAs, POAs, and PUDS, the property’s future is in the hands of the Board of Directors. A Reserve Study that is up to date and relevant on an annual basis safeguards board members from any liability that may arise from any evidence that the reserves have been mismanaged or poorly maintained
Reserve Studies are intended as a tool to anticipate and budget for the expense of repairing, refurbishing, or replacing common areas in an Association-governed community. In order for these shared locations to be properly maintained, enough funds must be allocated to “reserves” so that any deterioration and/or damage that occurs on the property may be fixed in a timely manner.
We’ve all heard the famous quote “Nothing is certain except for death and taxes”, often attributed to Benjamin Franklin. But we all know there are a few more certainties in life. Gravity, the sun rising every morning, and because the sun rises each morning and time marches forward in an unrelenting manner, deterioration is also inevitable. So why do so many boards, charged with maintaining the common areas of their association, fail to adequately prepare for the inevitable deterioration of the common areas?
We subscribe to a media monitoring service that scours the internet for any “mention” of our company name. We do this to measure our influence in the Reserve Study industry and identify hot issues or trends. With a company name like “Association Reserves”, we’ve had to refine our account settings to avoid the inevitable “such & such Association reserves the right…” and other irrelevant web posts.