Can The Board Use Reserve Funds For Items Not Listed In The Reserve Study?
Posted on June 29, 2020 8:00 AM by HOA Sites
Categories: HOA Website
A reserve fund is supposed to prepare the HOA for replacement and repair costs that will come along in the future. Reserve funds are crucial because they ensure that a community’s assets remain operational regardless of the deterioration that might occur over the years. The rules pertaining to how these funds get used are quite strict as they are meant to cater to specific issues and needs.
But, sometimes a problem arises that the reserve fund did not account for or isn’t listed in the reserve study. What happens then if no answer can be found on the neighborhood website? Can the HOA board take funds from the reserves to meet this unexpected expense?
Some people fail to understand why such situations occur since reserve funds are crafted by experts. They should account for every repair and any replacement cost the community might encounter. Residents presume that unexpected repair and replacement costs only happen in cases where the reserve specialist made a miscalculation.
However, this isn’t the case as not everything can be accounted for when analyzing a community. It’s almost impossible to identify all the potential failures. The good news is that reserve funds are flexible since they are prepared in a way to react to unforeseen circumstances.
When board members encounter an emergency, they are likely to feel more encouraged to seek expert assistance. Once the board has received guidance from a specialist, they can proceed by adding the new component to the reserve study. After that, the board can use the reserves to finance the new component but only if the reserves are well funded and can meet the needs of the project.
Many communities have strict rules governing the use of reserve funds and a majority of them can be reviewed from the neighborhood website. Other communities are more flexible when it comes to the way they handle matters in this area. Regardless of the situation, most homeowners wouldn’t object if the board used their power to resolve key components not included in the reserve fund!
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