How To Ensure The HOA Always Has Adequate Reserve Funds

Funds of the homeowners association are like an emergency savings account for your family; if the community lacks the funding it needs, it risks falling apart.  Imagine a situation where there is an emergency but the money in the reserve account won’t cover the costs.  This may cause homeowners to complain endlessly on the HOA website.
Inadequate reserve funds also result in the depreciation of property since common areas fail to receive proper care.  Another problem is that lenders might decline loan applications from your HOA so use the following strategies to help you avoid such troubling situations.

 

Perhaps you have enough funds in your reserves but then you encounter an unexpected expense that could deplete them.  Seek help from a reserve specialist to figure out which option best suits your HOA.  For instance, they might recommend borrowing or using special assessments to replenish the reserves.  Aside from that, they might also figure out a way to cut expenses.

 

Obviously, you need to operate reserve funds separately from regular funds.  The main reason for doing this is to eliminate the potential for funds getting used for the wrong purposes.  One way of separating funds is to adopt a reserve fund plan to help the homeowners association maintain its property.  Let the budget be reviewed regularly to ensure there’s always enough money in the reserves.

 

There’s no law that states the reserves must be funded but the court may see the failure of your HOA board as a breach of its fiduciary duty.  That means the association could face legal disputes and that puts an added strain on the reserves.  Last but not least, perform repairs in the community before they require extensive work.  Through the HOA website, you can seek input from members to know which areas need addressed the most.