Reserves

Started by JoseV2 • 5 replies • 1778 views

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JoseV2 (Florida)
Posts: 19

Posted:

We live in a community where the past and current HOA and Management companies have grossly neglected their responsibilities to maintain our community clean and beautiful. Our common areas are in despair, home owner, pretty much do as they well please. Total chaos. All of this could have been avoided and it's going to cost us a great deal of money to get it fixed. I rallied up over 20 homeowners and had them do a community inspection of all our common area. What they saw applaud them. They got furious and asked how could this have happen. Well the home owners were asleep. I mentioned that to make all the necessary repairs of our line of hedges, plants and trees we need to tap into the reserves. An HOA member out right said, NO. can touch that reserve. According to the what I have read so far, it appears that these funds can be rightfully utilized to make these emergency repairs. Can someone elaborate on this subject. Also, can I mention my facebook page? I posted a number of photo showing the deplorable conditions of our common areas.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I am not nor do I play a lawyer.

You do not have an emergency situation.

An association can borrow from the reserves as long as they have a fixed plan in place to repay the reserves. Example would be to borrow $24K and the $24K will be replaced at the rate of $1K per month for 24 months. The $1K per month will come from a dues increase of say $20 per unit (50 units), per month, for 24 months.

The owners will have to vote on the above sample plan.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Jose,

As John pointed out, Reserve funds are for reserve items.
You may borrow providing you have a plan to repay within a reasonable time frame. Example: Increase assessments x amount for 5 years.

You should not mention your facebook page. See posting rules by clicking on the big smiley face at the top of the page.

Yes the homeowners were asleep. However, the fault actually lies with the Board. Too often, Directors forget that having a management company still requires that the Directors oversee that things are getting done.

See FL 720.303 (6) Budgets (scroll down the page) for specifics about Reserves accounts.

See Subject: Reserve Studies/Funds 101, a thread on this forum, to learn more about Reserves.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Quote:

Posted By TimB4 on 08/06/2014 7:57 AM

Yes the homeowners were asleep. However, the fault actually lies with the Board. Too often, Directors forget that having a management company still requires that the Directors oversee that things are getting done.

Forgot to add that the issue might also be finances.

If your Association has a lot of delinquent accounts or members have thwarted increases in assessments, it's could be just a simple issue of not having enough money.

OR

It could be the landscape company. Read their contract to see if it includes trimming hedges, etc. If it does and it hasn't been done, the Board needs to hold the contractor to the terms of the contract. Additionally, when the contract is up, they should be seeking a new contractor.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

When you borrow from reserves, you should pay back the loan with interest. Remember, you are losing interest on the money you are borrowing so you need to pay that amount also. Otherwise, you won't have the money you're supposed to have according to your plan.

SheliaH (Indiana)
Posts: 6,964

Posted:

I concur with everything's said so far, but I'm also wondering when was the last time your community had a reserve study. If it's been over five years, you need to get one so you can get some estimates as to how much it will cost to replace these components years from now - after you get them fixed this time. The reserves will help you plan a more realistic budget. You may also want to consider setting up some sort of contingency fund - that would be used to cover emergency repairs and perhaps shortfalls to the monthly operations budget and you wouldn't have to touch the reserves. Talk to an accountant about tax implications and your attorney and/or insurance company about setting up a policy for its use (starting with defining "emergency")

In the meantime, you may as well brace yourself for higher assessments and possibly a special assessment to pay for some of the more expensive repairs your community may need. And remember, the Board tells the management company what to do, so if your board has let the place go to crap, homeowners may need to vote them out and replace them with people who will act accordingly. Everyone will have to stop with the "I'll do what I damn well please" thinking - that's probably another reason the common areas are suffering.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

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