Good question! There are two ways to answer a question regarding the appropriate use of Reserve Funds in 2020, depending on how it is asked. But first, it helps to know what the purpose is of a Reserve Fund.
All buildings begin to deteriorate the moment they are built. Anyone who owns a home quickly learns that they are guaranteed to have repair costs and replacement expenses down the road. But owners of homes in Association-governed communities face a unique challenge. These communities may be known by different acronyms — Condos, Co-Ops, HOAs, POAs, or PUDs — but they all have one common need: A Reserve Study so the Board can make informed decisions, avoid special assessments, budget responsibly for predictable repairs & replacements, save money, and protect property values.
The purpose of a Reserve Fund is simply to have enough funds set aside to pay for inevitable repair & replacement expenses when needed. Not only does this keep the property in good repair, but helps to limit financial surprises to the owners.
Board members and managers of condos, HOAs and other forms of association-governed communities are often confronted with a major repair or replacement expenditure they think should be a Reserve expense, but cannot find it on the Reserve Component List. Your Reserve Component List is a good first place to look because it identifies specifically what you are reserving for. Components that might be on this list could be projects like repainting, reroofing, or resurfacing the common area driveway.
But what if the repair doesn’t appear in your latest Reserve Study. Can you pay for it from Reserves in 2020? Here are two ways to know: