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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:

Does our Association Need to have Healthy Reserves?

A good answer is both “yes” and “no”. Let me explain.

Setting our Industry Up for Success

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.