In any homeowners association, there should be funds allocated towards repairs in the future or to cover maintenance needs that might be expensive. Reserve funds make it possible for repairs and maintenance in the community to be performed without delays or burdening homeowners with a special assessment. Do HOA board members have a financial plan in place for the future of your homeowners association and the homeowners association website?
Budgeting For The Future
In the homeowners association, a sequence of repairs can result in a shortage of reserve funds. The HOA board has the challenging task of ensuring adequate money is always in the reserves. Costly repairs such as roofs need to be saved for but the average life span of a roof is anywhere from 15 to 30 years depending on the roofing materials and labor costs.
If it would cost $75,000 to replace the roof and it needs replaced after 15 years, then each year $5,000 should be saved. The HOA board should make sure a percentage of the HOA fees are set aside for the reserve fund so all areas of the homeowners association are well-kept. How can the HOA board confirm that the reserve fund always has enough money?
Conduct A Reserve Study
The process of conducting a reserve study involves analyzing the homeowners association visually and creating a plan that considers all repairs or replacements. Do you know when your homeowners association last performed a reserve study?
A reserve study should be updated yearly even when no repairs are performed as the rate of inflation has a profound impact on funding future projects. Know which items the homeowners association is responsible for by frequently visiting the homeowners association website and reading the governing documents. You should always question how the HOA board will fund major projects in the future as it may save you from a special assessment!