How Much are Adequate Reserve Contributions?
At Association Reserves we understand board members face a big challenge to budget for the maintenance and replacement of their association’s major common area assets.
Many, if not most Governing Documents require the Board to set aside “adequate Reserves” to care for the common areas. But what exactly are “adequate Reserves”?
California Civil Code 5550 requires a Reserve Study based on a “diligent visual site inspection” at least every third year, but requires the Board review that Reserve Study annually and “consider and implement necessary adjustments”. That’s called an annual Reserve Study update.
We all know that scarcity causes conflict and stress. Scarcity of Reserves causes deferred maintenance and special assessments, drags down property values, and causes other related problems. How can an association avoid these problems and emerge with sufficient funds to maintain the community, maximizing property values and pride of ownership?
After 30 years preparing Reserve Studies, helping associations make wise decisions about their capital budgets to avoid surprises and the high cost of deferred maintenance, Robert Nordlund of Association Reserves has joined the national “Think Tank” of the Foundation for Community Association Research (FCAR) to help the industry on a broader spectrum. Watch a brief video introducing 2016 Think Tank members and projects here.
A good answer is both “yes” and “no”. Let me explain. Yes: Typical Governing Documents and the uniform legal expectations of Boardmembers across the country require Boardmembers to maintain and protect the assets of the corporation on behalf of the owners.