TedS (Arizona)
Posts: 1
Posts: 1
Posted:
our hoa has no reserve funds,is there a certain percentage of the annual h/o
dues to be put aside for the reserve funds?
dues to be put aside for the reserve funds?
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arizona laws in regards to reserve funds
Started by TedS • 4 replies • 4344 views
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GeraldT1 (<Not Specified>)
Posts: 519
Posts: 519
Posted:
TedS,
Reserve Funds are to cover the replacement costs of common elements the HOA maintains (sidewalks, roofs, gutters, leaders, common roadways if owned by the HOA, siding, etc.. The replacement costs are a forecast of what the HOA will need to have set aside once the elements are at the end of their lifespan.
A percentage of the annual h/o dues approach is not adequate for reserve funding.
The first step is to contract an independent engineering firm to survey/inspect the association to document the current condition of the elements, to provide remedial recommendations, and to create a table that shows the replacement cost AND a corresponding lifespan of each element the HOA maintains. For example: Concrete sidewalks = $8.60 per sq. foot with a 25 year lifespan. If there are 1400 sq. feet of sidewalk the cost is $12,040 divided by 25 years = $481.60/year divided by number of HOA residents = X amount to allocate from h/o dues per unit. The replacement costs do not include inflation and represent a full funding approach. The engineering firm should explain the different methodologies of funding for reserves.
Once this is done you may then arrive at a percentage of the annual h/o dues that is transferred to reserves. Until you go through the process of an engineering study, it will be hit or miss if you are allocating enough to cover the replacement of elements.
Best of success!!
GeraldT1
NNJ
Reserve Funds are to cover the replacement costs of common elements the HOA maintains (sidewalks, roofs, gutters, leaders, common roadways if owned by the HOA, siding, etc.. The replacement costs are a forecast of what the HOA will need to have set aside once the elements are at the end of their lifespan.
A percentage of the annual h/o dues approach is not adequate for reserve funding.
The first step is to contract an independent engineering firm to survey/inspect the association to document the current condition of the elements, to provide remedial recommendations, and to create a table that shows the replacement cost AND a corresponding lifespan of each element the HOA maintains. For example: Concrete sidewalks = $8.60 per sq. foot with a 25 year lifespan. If there are 1400 sq. feet of sidewalk the cost is $12,040 divided by 25 years = $481.60/year divided by number of HOA residents = X amount to allocate from h/o dues per unit. The replacement costs do not include inflation and represent a full funding approach. The engineering firm should explain the different methodologies of funding for reserves.
Once this is done you may then arrive at a percentage of the annual h/o dues that is transferred to reserves. Until you go through the process of an engineering study, it will be hit or miss if you are allocating enough to cover the replacement of elements.
Best of success!!
GeraldT1
NNJ
LindaC3 (Florida)
Posts: 526
Posts: 526
Posted:
Gerald-- Thanks so much for this great information.....I will have to show this to our BOD....We are in Florida and they have put out some hypo- number for our reserves and it is called a "reserve contribution".....However it is not really earmarked for a specific purpose- Just extra $$$ the BOD says we have to have in an account $150,000.00...... We pay $135.00 per month dues and $28.00 per month for the "reserve" My question is and has never been answered- Our HOA is a NOT FOR PROFIT and I have always wondered about having all that money in an account- It is revenue if I understand correctly and thus is there any implication that could harm our not for profit status by having all that money laying around ???? Linda C
GeraldT1 (<Not Specified>)
Posts: 519
Posts: 519
Posted:
LindaC3,
No, your not for profit status will not be in jeopardy because of the funds you've allocated to reserves. You will (hopefully) always have money in the reserve account. The important question is, how was the $28.00 per month (21%)derived?
GeraldT1
NNJ
No, your not for profit status will not be in jeopardy because of the funds you've allocated to reserves. You will (hopefully) always have money in the reserve account. The important question is, how was the $28.00 per month (21%)derived?
GeraldT1
NNJ
LindaC3 (Florida)
Posts: 526
Posts: 526
Posted:
GeraldT1-- Good question..I have no idea--- I have someone who is well versed in understanding financial documents and to date they say something funky going on with the numbers........They took this out of that and put it there and now we are all confused..I attended the last budget meeting 18 hours before the BOD was to vote on it and only 13 people were given "revised" numbers from the oringinal proposed budget..I asked if they were going to send out this revised proposed budget to all the Members as required by a 30 day notice and they said NOPE-- too late- it has to go before the BOD tomorrow a.m. I was aghast.........Another violation and complete disregard for following the By LAws and Fla State Statute........These folks here just dont get it--I am seeking a seat on the BOD- election this weekend the 21st....We need to get a BOD in here that will follow by laws and the laws of the state and clean this place up....They have been mismanaging this place since 1973 and it's time for a clean slate before the state comes in and shuts us down.....would hate to see that happen....And the meek shall inherit the HOA mess............LindaC
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