JoeB21 (California)
Posts: 19
Posts: 19
Posted:
Does Davis-Stirling deal with initiation and approval of large capital projects ? At what point is a membership vote required ? We are considering a project and need to know if this must go to a vote.
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Davis-Stirling and Capital Projects
Started by JoeB21 • 58 replies • 1531 views
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GeorgeS21 (Florida)
Posts: 3,808
Posts: 3,808
Posted:
Joe,
Did you read through D-S?
Did you read through D-S?
AugustinD
Posts: 5,144
Posts: 5,144
Posted:
The following sites are authored by a law firm specialized in Davis-Stirling:
https://www.davis-stirling.com/HOME/Capital-Improvement
https://www.davis-stirling.com/HOME/Reserve-Expenditures
https://www.davis-stirling.com/HOME/Capital-Improvement
https://www.davis-stirling.com/HOME/Reserve-Expenditures
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Welcome to the Forum, JoeB. Are you on the board?
Agustin is right, visit: https://www.davis-stirling.com/HOME/Capital-Improvement. This website by a CA HOA law firm is about CA legislation, but often offers great advice about things that aren't legislation and other things that can be generalized to other US states.
First, make sure you know the difference between capital improvements (or expenditures) and reserves expenses. I've seen confusion on this site before between the two.
Pay special attention to these headings: "Discretionary Improvements," "Upgrades to Materials," and "Material Alteration in Appearance." The others are worthwhile too.
Can you tell us what the project is you're considering?
Agustin is right, visit: https://www.davis-stirling.com/HOME/Capital-Improvement. This website by a CA HOA law firm is about CA legislation, but often offers great advice about things that aren't legislation and other things that can be generalized to other US states.
First, make sure you know the difference between capital improvements (or expenditures) and reserves expenses. I've seen confusion on this site before between the two.
Pay special attention to these headings: "Discretionary Improvements," "Upgrades to Materials," and "Material Alteration in Appearance." The others are worthwhile too.
Can you tell us what the project is you're considering?
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
Yes - could not find anything specific - other than the use or reserve funds.
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
Yes - saw these links - thank you.
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
This is definitely a capital improvement - no question.
The big question has to do with operating funds.
Can the board change the allocation - operating v reserve fund percentages for 2020 to pay for a capital project ?
Would that get around the use of reserve funds for the project ?
The big question has to do with operating funds.
Can the board change the allocation - operating v reserve fund percentages for 2020 to pay for a capital project ?
Would that get around the use of reserve funds for the project ?
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
- a new capital project
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Joe, please read the site
You many NOT use reserves for a capital improvement.
You many NOT use reserves for a capital improvement.
MarkW18
Posts: 1,290
Posts: 1,290
Posted:
Actually capital improvements can be funded through their reserves, AS LONG as the money is replaced within 12 months and the association is properly notified of the Board's intentions through a properly noticed meeting.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Thanks for the correction, Mark. Yes, you can "borrow" the funds from reserves, Joe, but need to show how you'll pay it back. Se the above web site for requirements regarding borrowing from reserves.
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
Thank you. I understand the reserves and capital project conflict but thank you for your post.
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
I am sorry if this was not clear.
The question is:
Can OPERATING FUNDS be used for a CAPITAL PROJECT ?
If so what are the restrictions ?
MarkW18
Posts: 1,290
Posts: 1,290
Posted:
Quote:
Posted By JoeB21 on 11/09/2019 8:45 PM
I am sorry if this was not clear.
The question is:
Can OPERATING FUNDS be used for a CAPITAL PROJECT ?
If so what are the restrictions ?
I am sorry if this was not clear.
The question is:
Can OPERATING FUNDS be used for a CAPITAL PROJECT ?
If so what are the restrictions ?
YES
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Joe
The answer is Capital Improvements are not things that Reserve Funds should be used for. Typically Capital Improvements are paid for by setting money aside for and/or by a Special Assessment. They are not paid for from Reserve funds.
Let us say a Budget calls for $50K to be put in Reserve Funding but the BOD decides to put $25K in Reserve Funding and $25K to a Capital improvement. I say as long as your docs did not specify that $50K had to be put in Reserve Funding, the BOD might could do it. Sooner or later someone might question the "money shift" but a budget is at best, a best guess and things change as time goes on.
The answer is Capital Improvements are not things that Reserve Funds should be used for. Typically Capital Improvements are paid for by setting money aside for and/or by a Special Assessment. They are not paid for from Reserve funds.
Let us say a Budget calls for $50K to be put in Reserve Funding but the BOD decides to put $25K in Reserve Funding and $25K to a Capital improvement. I say as long as your docs did not specify that $50K had to be put in Reserve Funding, the BOD might could do it. Sooner or later someone might question the "money shift" but a budget is at best, a best guess and things change as time goes on.
JoeB21 (California)
Posts: 19
Posts: 19
Posted:
Understood.
These things get tricky when you have a board that plays games with other people's money.
Thank you for your help.
These things get tricky when you have a board that plays games with other people's money.
Thank you for your help.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
This is a similar question. A board member in my HOA wants to use Reserve funds for repair and maintenance of the clubhouse to instead tear down the clubhouse and build a pickle ball court. From my reading, I believe that the construction of a court would be a capital improvement project and reserve funds are neither to be diverted from their intended purpose nor are they to be used for capital improvement projects. Any feedback welcome.
JohnT38 (South Carolina)
Posts: 1,631
Posts: 1,631
Posted:
Quote:
Posted By PhyllisL3 on 01/15/2023 12:58 PM
This is a similar question. A board member in my HOA wants to use Reserve funds for repair and maintenance of the clubhouse to instead tear down the clubhouse and build a pickle ball court. From my reading, I believe that the construction of a court would be a capital improvement project and reserve funds are neither to be diverted from their intended purpose nor are they to be used for capital improvement projects. Any feedback welcome.
This is a similar question. A board member in my HOA wants to use Reserve funds for repair and maintenance of the clubhouse to instead tear down the clubhouse and build a pickle ball court. From my reading, I believe that the construction of a court would be a capital improvement project and reserve funds are neither to be diverted from their intended purpose nor are they to be used for capital improvement projects. Any feedback welcome.
My question is can you add a new amenity without a community vote? We could not.
MaxB4
Posts: 3,513
Posts: 3,513
Posted:
This is a tricky question. Can you replace one amenity with another? I would think yes, but it would have to be approved by the required number of owners via secret ballot voting. The funds could come from the monies designated from the clubhouse. But, if more is needed, it would be borrowed from reserves as long as repaid within 12 months, possibly via a special assessment.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
If expenditure for a capital improvement exceeds 5% or our budgeted gross expenses for the fiscal year, the board must seek the approval of the membership. This project would exceed 5% of budgeted gross expenses.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
I searched for a reference stating that a new capital improvement project could use reserve funds slated for repair of an existing amenity, but I could not find anything. What I did find stated that reserve funds cannot be used for capital improvement projects.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Phyllis, is the clubhouse mentioned anywhere in the Declaration or Bylaws? If so, I would not proceed without an owners' vote to amend this.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
The clubhouse is mentioned in the CC&Rs as one of our common area assets.
It does require a vote of the membership to tear down and replace the clubhouse with a pickleball court, because that is both demolishing an existing asset and proposing a capital improvement project.
The sponsors of the plan do not intend to tell the homeowners that a special assessment would be required to pay for it, because they think they can merely shift the reserve fund money for repair of the clubhouse to funding this project.
Everything I have read says that we cannot shift Reserve account money slated for repair of an existing asset to fund a capital improvement project of a different kind.
The CC&Rs also state that capital improvements would require a special assessment of the membership if expenditures would be more than 5% of the budgeted gross expenses for one fiscal year, and this project would cost more than 5% of budgeted expenses.
It does require a vote of the membership to tear down and replace the clubhouse with a pickleball court, because that is both demolishing an existing asset and proposing a capital improvement project.
The sponsors of the plan do not intend to tell the homeowners that a special assessment would be required to pay for it, because they think they can merely shift the reserve fund money for repair of the clubhouse to funding this project.
Everything I have read says that we cannot shift Reserve account money slated for repair of an existing asset to fund a capital improvement project of a different kind.
The CC&Rs also state that capital improvements would require a special assessment of the membership if expenditures would be more than 5% of the budgeted gross expenses for one fiscal year, and this project would cost more than 5% of budgeted expenses.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Quote:
Posted By PhyllisL3 on 01/15/2023 3:24 PM
The clubhouse is mentioned in the CC&Rs as one of our common area assets.
It does require a vote of the membership to tear down and replace the clubhouse with a pickleball court, because that
The clubhouse is mentioned in the CC&Rs as one of our common area assets.
It does require a vote of the membership to tear down and replace the clubhouse with a pickleball court, because that
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Our CC&Rs make it clear that Owners would have to vote on this change to the common areas too. I do not think an amendment to the CC&R would be required, given a positive owner vote. Our CC&Rs have no vanities listed in them, so curious about what section of your CC&Rs the clubhouse is in. some sort of appendix? I would expect to see such amenities in the Bylaws.
The change, of course, is to the reserve study. I agree with others that the reserve amount being built up to rear/replace the clubhouse and be used instead for a capital improvement.
It seems to me the Board must get the opinion of the HOA attorney on this point. He's a possible scenario: The reserves account is 100$ funded. There's tons of funds setting in it. The $50,000 in the reserve study earmarked to repair and replace the v clubhouse won't ever be expensed. So you end up with a reserve account that's, say 140% funded. What do do with all that money. Well, you could return it to owners. And th special assess them to pay for the pickle ball court? Seems complicated. The board needs legal advice, which it must share with owners.
The change, of course, is to the reserve study. I agree with others that the reserve amount being built up to rear/replace the clubhouse and be used instead for a capital improvement.
It seems to me the Board must get the opinion of the HOA attorney on this point. He's a possible scenario: The reserves account is 100$ funded. There's tons of funds setting in it. The $50,000 in the reserve study earmarked to repair and replace the v clubhouse won't ever be expensed. So you end up with a reserve account that's, say 140% funded. What do do with all that money. Well, you could return it to owners. And th special assess them to pay for the pickle ball court? Seems complicated. The board needs legal advice, which it must share with owners.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
The clubhouse is mentioned in the declaration of CC&Rs in the section stating that "the Association is solely responsible for all maintenance, repair, upkeep and replacement within the Common Area, including the clubhouse, the swimming pools and adjacent areas, pool equipment, maintenance shed...." No specific common area facilities/amenties are mentioned in the bylaws. There is no language in either document regarding the removal of a common area facility.
MaxB4
Posts: 3,513
Posts: 3,513
Posted:
If this were me, and since the clubhouse is indeed mentioned, I would have the CCRs amended by the required vote of the membership. What if a new buyer comes into your community and wonders where the clubhouse, mentioned in your CCRs (the Bible)>
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
The issue isn't settled yet as to whether to remove the clubhouse. The board is divided on the issue. At least half the board does not want to remove the clubhouse but wants to renovate it using our reserve account funds that were established for that purpose. My question really isn't about how to achieve the removal, but just to look into the legality of the proposed plan. Actually it's not really a formal plan; it's just in the talking stage and their idea was to ask the owners if they want to tear it down, however they don't want to tell the owners that it would require a special assessment to pay for it, because they claim, erroneously, that the reserve account funds can be used. So it is a case of how to diplomatically tell them that dog don't hunt, because their idea of how to fund it is illegal. They ought to know that. They are long time board members but they are used to calling the shots. Someone made a comment in this thread about board members playing games with other people's money--yes, that is what it looks like. Well, maybe it is ignorance on their part rather than deception. I hope so. I don't like to think they would knowingly do this.
MaxB4
Posts: 3,513
Posts: 3,513
Posted:
Quote:
Posted By PhyllisL3 on 01/16/2023 12:38 PM
The issue isn't settled yet as to whether to remove the clubhouse. The board is divided on the issue. At least half the board does not want to remove the clubhouse but wants to renovate it using our reserve account funds that were established for that purpose. My question really isn't about how to achieve the removal, but just to look into the legality of the proposed plan. Actually it's not really a formal plan; it's just in the talking stage and their idea was to ask the owners if they want to tear it down, however they don't want to tell the owners that it would require a special assessment to pay for it, because they claim, erroneously, that the reserve account funds can be used. So it is a case of how to diplomatically tell them that dog don't hunt, because their idea of how to fund it is illegal. They ought to know that. They are long time board members but they are used to calling the shots. Someone made a comment in this thread about board members playing games with other people's money--yes, that is what it looks like. Well, maybe it is ignorance on their part rather than deception. I hope so. I don't like to think they would knowingly do this.
The issue isn't settled yet as to whether to remove the clubhouse. The board is divided on the issue. At least half the board does not want to remove the clubhouse but wants to renovate it using our reserve account funds that were established for that purpose. My question really isn't about how to achieve the removal, but just to look into the legality of the proposed plan. Actually it's not really a formal plan; it's just in the talking stage and their idea was to ask the owners if they want to tear it down, however they don't want to tell the owners that it would require a special assessment to pay for it, because they claim, erroneously, that the reserve account funds can be used. So it is a case of how to diplomatically tell them that dog don't hunt, because their idea of how to fund it is illegal. They ought to know that. They are long time board members but they are used to calling the shots. Someone made a comment in this thread about board members playing games with other people's money--yes, that is what it looks like. Well, maybe it is ignorance on their part rather than deception. I hope so. I don't like to think they would knowingly do this.
We can all play lawyer here, but at the end of the day, if your association is seriously considering doing this, they need the association's legal counsel guiding you through this.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Sorry, my typo: I would NOT expect to see any amenities listed in the bylaws.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
Yes, you are right. Try as we do to understand, we are not trained lawyers. Even the lawyers argue about interpretation of the law. It's kind of scary when you think of it. Our fate, living under the law is in the hands of whomever comes up with the most impressive argument. I am still grateful for our system of jurisprudence. I've been watching "The Last Kingdom" and I am soooo glad I wasn't born in medieval times. LOL.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
Thanks Kerry, someone else mentioned that amenities should be in the bylaws and I wondered why. No harm done.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Quote:
Posted By PhyllisL3 on 01/16/2023 12:38 PM
The issue isn't settled yet as to whether to remove the clubhouse. The board is divided on the issue. At least half the board does not want to remove the clubhouse but wants to renovate it using our reserve account funds that were established for that purpose. My question really isn't about how to achieve the removal, but just to look into the legality of the proposed plan. Actually it's not really a formal plan; it's just in the talking stage and their idea was to ask the owners if they want to tear it down, however they don't want to tell the owners that it would require a special assessment to pay for it, because they claim, erroneously, that the reserve account funds can be used.
The issue isn't settled yet as to whether to remove the clubhouse. The board is divided on the issue. At least half the board does not want to remove the clubhouse but wants to renovate it using our reserve account funds that were established for that purpose. My question really isn't about how to achieve the removal, but just to look into the legality of the proposed plan. Actually it's not really a formal plan; it's just in the talking stage and their idea was to ask the owners if they want to tear it down, however they don't want to tell the owners that it would require a special assessment to pay for it, because they claim, erroneously, that the reserve account funds can be used.
"If the association does not have sufficient funds to pay for the improvement and needs to impose a special assessment that exceeds 5% of the budgeted gross expenses, the board will need membership approval."
Presumably some part of the present reserve funds is earmarked for the clubhouse. Why couldn't this portion of the reserve funds be re-purposed to fund the new pickleball court?
I also do not understand why you again speak about some faction of the board wanting to do such-and-such when it's the owners, and only the owners, who have the power to make this decision.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
Sorry, Ellen, there has been some miscommunication here. We are not trying to amend our CC&Rs. We are in the discussion stage about whether to present this idea to the owners or not. Reserve funds for a particular component, by law, are to be spent only on the component the fund was established for.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Quote:
Posted By PhyllisL3 on 01/16/2023 3:39 PM
Sorry, Ellen, there has been some miscommunication here. We are not trying to amend our CC&Rs. We are in the discussion stage about whether to present this idea to the owners or not. Reserve funds for a particular component, by law, are to be spent only on the component the fund was established for.
Sorry, Ellen, there has been some miscommunication here. We are not trying to amend our CC&Rs. We are in the discussion stage about whether to present this idea to the owners or not. Reserve funds for a particular component, by law, are to be spent only on the component the fund was established for.
Also can you please quote me the law that says reserve funds for a particular component are to be spent only on the component the fund was established for? Because I think what you are posting reflects a misunderstanding of reserve funding and what the law says.
Your HOA has a number of reserve components, right? And the last reserve study set up a plan to fund all of them (as they age and need replacement), right?
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
PhyllisL3, never mind. I thought you came here with questions or maybe a check on what you think you know. The way this exchange is going says to me this is not really the case. Good luck.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
California Civil Code Section 5510 (b) The board shall not expend funds designated as reserve funds for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components that the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established.
So, sorry, Ellen, I don't know how we got crosswise in this conversation. I have no hard feelings. Thanks for your input.
So, sorry, Ellen, I don't know how we got crosswise in this conversation. I have no hard feelings. Thanks for your input.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
California Civil Code Section 5510 (b) The board shall not expend funds designated as reserve funds for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components that the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established.
So, sorry, Ellen, I don't know how we got crosswise in this conversation. I have no hard feelings. Thanks for your input.
So, sorry, Ellen, I don't know how we got crosswise in this conversation. I have no hard feelings. Thanks for your input.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Phyllis, I appreciate your civility. I also appreciate your quoting the statute that you think supports your position. I don't think people interpret this statute section the way you do. But I will leave it to others here to opine.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
The way I interpret this statute is the same way a dozen HOA law blogs interpret it. I think my original question somehow got hijacked by someone who thought we want to amend our CC&Rs, and that is where a lot of the confusion came in. So, sorry again. I don' think these online discussions are such a good idea; people seem to misunderstand each other too much. I am not going to try this again; the communication medium is just too cumbersome. Thanks again.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Don't give up on us yet, Phyllis. I was going to find the exact citation you quoted from the Davis-Stirling Act. I read it as you do: the HOA must use reserve funds for components "...the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established." "For which the fund was established" means to me to repair, etc. all of the components listed in the reserve study. And nothing additional. I don't occupy any legal fields and don't feel completely confident that my interpretation--and yours-- is correct
Max & JohnT, imo, gave you good answers. My own sloppy typing introduced confusion, and I'm sorry. I agree that owners must vote and that the cost no matter the source--must be disclosed to them on a ballot. This is why your board must seek your HOA's GC's advice. You're on the board, Phyllis?
So now I'm curious how this discussion about keeping the funding secret could have occurred among a quorum of the board. As you know, if a quorum, this only could have been discussed at an open meeting in CA
Max & JohnT, imo, gave you good answers. My own sloppy typing introduced confusion, and I'm sorry. I agree that owners must vote and that the cost no matter the source--must be disclosed to them on a ballot. This is why your board must seek your HOA's GC's advice. You're on the board, Phyllis?
So now I'm curious how this discussion about keeping the funding secret could have occurred among a quorum of the board. As you know, if a quorum, this only could have been discussed at an open meeting in CA
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Other confusion may have come from ElleN's note: "Also can you please quote me the law that says reserve funds for a particular component are to be spent only on the component the fund was established for?" I don't think that's what you said, Phyllis, or what you believe. And it isn't part of your dilemma.
We all know that the reserves fund is one big pot of money to repair/replace everything listed in it. If a component fails early, or the study isn't fully funded when the component fails, and there isn't "enough" as suggested by its particular reserve entry, the HOA certainly can draw from the reserve account as a whole to repair/replace it.
We all know that the reserves fund is one big pot of money to repair/replace everything listed in it. If a component fails early, or the study isn't fully funded when the component fails, and there isn't "enough" as suggested by its particular reserve entry, the HOA certainly can draw from the reserve account as a whole to repair/replace it.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Don't give up on us yet, Phyllis. I was going to find the exact citation you quoted from the Davis-Stirling Act. I read it as you do: the HOA must use reserve funds for components "...the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established." "For which the fund was established" means to me to repair, etc. all of the components listed in the reserve study. And nothing additional. I don't occupy any legal fields and don't feel completely confident that my interpretation--and yours-- is correct
Max & JohnT, imo, gave you good answers. My own sloppy typing introduced confusion, and I'm sorry. I agree that owners must vote and that the cost no matter the source--must be disclosed to them on a ballot. This is why your board must seek your HOA's GC's advice. You're on the board, Phyllis?
So now I'm curious how this discussion about keeping the funding secret could have occurred among a quorum of the board. As you know, if a quorum, this only could have been discussed at an open meeting in CA
Max & JohnT, imo, gave you good answers. My own sloppy typing introduced confusion, and I'm sorry. I agree that owners must vote and that the cost no matter the source--must be disclosed to them on a ballot. This is why your board must seek your HOA's GC's advice. You're on the board, Phyllis?
So now I'm curious how this discussion about keeping the funding secret could have occurred among a quorum of the board. As you know, if a quorum, this only could have been discussed at an open meeting in CA
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
You bring up an important distinction. Does the fund "for which it was established" mean all existing components in the reserve study, or does it mean the specifically named component, or does it mean all existing components? I read somewhere that replacement of a minor (low cost) component that was omitted from the reserve study could be paid from the reserve fund but that the component should be added to the next year's reserve study. The individual components are really just estimates in a big pool of reserve money?
I am, however, positive from my reading that reserve funds cannot be spent to construct something new.
The funding secret isn't a formal thing. Not yet. It is early days. The proponents of the plan are discussing polling the owners as to whether they want this project, but since the proponents claim the project can be funded by reserve money, they are not telling the owners in the poll that they would have to pay for it by a Special Assessment. I think the board is going to hold strong and tell them they must not send the poll like that; it must tell the owners there will be costs. After all, it isn't right to dangle the carrot and then have to say, whoops, we forgot to tell you that if you approve of this, you are going to have to pay the $$$$ for this. No one likes special assessments.
Well thanks again for listening and giving feedback. Like you I am not a lawyer or accountant and I am trying hard to make sure that I have correctly interpreted what I have read. When I am so bold as to tell someone else they are wrong, I very much prefer to know what I am talking about.
I am, however, positive from my reading that reserve funds cannot be spent to construct something new.
The funding secret isn't a formal thing. Not yet. It is early days. The proponents of the plan are discussing polling the owners as to whether they want this project, but since the proponents claim the project can be funded by reserve money, they are not telling the owners in the poll that they would have to pay for it by a Special Assessment. I think the board is going to hold strong and tell them they must not send the poll like that; it must tell the owners there will be costs. After all, it isn't right to dangle the carrot and then have to say, whoops, we forgot to tell you that if you approve of this, you are going to have to pay the $$$$ for this. No one likes special assessments.
Well thanks again for listening and giving feedback. Like you I am not a lawyer or accountant and I am trying hard to make sure that I have correctly interpreted what I have read. When I am so bold as to tell someone else they are wrong, I very much prefer to know what I am talking about.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Quote:
Posted By KerryL1 on 01/16/2023 6:43 PM
We all know that the reserves fund is one big pot of money to repair/replace everything listed in it. If a component fails early, or the study isn't fully funded when the component fails, and there isn't "enough" as suggested by its particular reserve entry, the HOA certainly can draw from the reserve account as a whole to repair/replace it.
We all know that the reserves fund is one big pot of money to repair/replace everything listed in it. If a component fails early, or the study isn't fully funded when the component fails, and there isn't "enough" as suggested by its particular reserve entry, the HOA certainly can draw from the reserve account as a whole to repair/replace it.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
Thanks Ellen, the amendment idea is something I don't know anything about, but we will see where the future takes us.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
Thanks Kerry, I had thought our accountant had said something about the big pot of money, and I think she said that overspending any particular component would affect our percentage funded for the HOA. I think she said we could do it, but with the understanding that we want to avoid overspending any particular component since it represents a plan to stay on track financially and will reduce our financial health. I am sort of new to this, as you can see, but doing my best to get up to speed.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
Meanwhile, our accountant has got back to us and everything I thought I understood was correct. I just couldn't understand why two seasoned board members wouldn't know something that is easily discoverable with a little effort. Doubts about my sanity are subdued.
ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Quote:
Posted By PhyllisL3 on 01/17/2023 10:32 AM
Meanwhile, our accountant has got back to us and everything I thought I understood was correct. I just couldn't understand why two seasoned board members wouldn't know something that is easily discoverable with a little effort. Doubts about my sanity are subdued.
Meanwhile, our accountant has got back to us and everything I thought I understood was correct. I just couldn't understand why two seasoned board members wouldn't know something that is easily discoverable with a little effort. Doubts about my sanity are subdued.
PhyllisL3 (California)
Posts: 116
Posts: 116
Posted:
I will try. I am not the contact for our accountant. it is a good question.
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