eBooks, Articles, & More

What can Reserve Funds be Used For?

Good question! There are two ways to answer a question regarding the appropriate use of Reserve Funds, depending on how it is asked. Boardmembers and managers of condos, HOAs and other forms of community associations are often confronted with a major repair or replace expenditure they think should be a Reserve expense, but can not find it on the Reserve Component List (a good first place to look).

The Four Reserve Rules

In preparing to speak to two different audiences in two days, both made up of new boardmembers and new managers, I wanted to make sure I was communicating the simple truths about Reserve planning. It forced me to get down to the real basics, and in almost 30 years I found I had never crystallized my thoughts on the matter. What indeed are the underlying rules, on which all the details are based? So after some pondering, reflecting on questions I’ve recently fielded, and problems I’ve recently helped solve, I came up with this short list. I believe it defines the underlying reasons why Reserve planning, Reserve Studies, and National Reserve Study Standards are important:

Underfunded Reserves – the $10 Solution!

In a recent webinar, an attendee remarked how simple it seemed to get on the path to appropriate Reserve funding. They were right! The problem of underfunded Reserves in community associations across the country can eliminated in five years with the $10 solution. Follow along as I explain.

Is 10% of Budget to Reserves a Law?

Click here to see a list of laws we compiled from across the country with respect to Reserves. While 30 states have some legal requirements, the "10% of budget to Reserves" is not a law. But it's something you want to do. Due to the financial meltdown that began approx 2008, more lenders are particular with respect to making loans. Fannie Mae, Freddie Mac, and FHA have enacted a requirement that Reserve contributions comprise at least 10% of total budgeted assessment income (Note: this only applies to condominiums, it does not apply to planned development or home-owner associations).

Can Reserve Funds be used for Drought-Friendly Landscape Renovations?

In the middle of a major drought, many of our California clients are asking this question as they try to be both “good citizens” and financially responsible. The answer is yes, but… Landscape renovations can be classified as a Reserve Project if they meet the National Reserve Study Standard four-part test:

Reserve Funding – It’s Not About the Future!

One of the biggest misconceptions about Reserve contributions I hear, even more than “they’re too much” or “we can’t afford them” (which I’ll address in another post), is that they are for the future. I don’t know how I can be any more clear on this matter. Reserve contributions are not for the future. Reserve contributions offset ongoing, day to day, current deterioration.