Reserves

Approximately how much money should we have in reserves for a Condominium community with 76 units? We pay $51.92 a month (per unit) for this reserve fund.

The reserve fund covers driveway,roofing,insurance,gutters,painting and contingency.

We also pay $9.36 a month (per unit) for management fee`s.

Do we really need a management company to take care of our budget?

Anthony Palevo, Tennessee

No you do not need a MC if you have people in the community willing to step up and do the work for free. But usually even the most gung-ho people will eventually burn out. There are many well run self run Associations out there but it requires time and dedication.

No one on this forum can tell you if you're putting enough into reserves, you need a reserve study done IMO by a qualified professional reserve specialist not the MC. While I have no doubt that many MC's can do the job, I would prefer to have a second opinion. (Sorry Roger) No you do not need the MC to do your budget but they are a great help especially to new Associations.

Using the search feature at the top of the page search for: reserves, management companies, budget, etc. and you will find many opinions and varied advice on all of your questions

Is the management fee is only for the MC to handle your payables and receivables? For $711 a month you have a deal. It would cost your condo more than that to hire part-time office personnel for this job.

Do get a reserve study done. It is well worth the cost. You will be able to define the replacement and repair costs for each common item. This will help in getting a true amount that your condo can appropriate to the reserves.

Maybe just a rational discussion on the necessities involved with owning a home, explaining that the reserves are a savings account in which each puts money each month so that when the need arises, the money is there to repair or replace what is needed.

For those of us in single family homes, besides paying into the hoa reserve account each month, we also have to save money on our own (or borrow)for new roof, paint, hvac, etc. If it's not in the bank, it will require a large assessment when it IS needed.

Can anyone tell me if a reserve account has to be maintained. When our budget was given to the HO's they had alloted $9000. ($750.) a month. I recently requested the bank statements from the MC and I saw that there was NO deposit into the reserve for June, July and Aug.....Can the Board raise our dues, make a new budget and then not pay into the reserve account.

Sidney - There is a very simple solution to your problem - have your bank do the internal transfer monthly for the Association - most times, it is simply an electronic recurring file that they process on the same day each month. Since most assessment payments are late after the 15th of each month, it is usual to have the transfer done either on the 15th or 16th monthly, at which point your cash flow can sustain the transfer amount.

Jim,
The question on length of time in years needs to be long enough to replace the longest longevity item. I include all items which are not included in the operating budget. For example, I would list maintenance items such as repair of the gas grill in the operating budget and whereas replacement might be in the reserve budget. Big ticket items, like roads, roofs, and significant upgrades, are included in the reserve plan. However, not all replacement items have a significant cost compared to the annual operating expenses. When this does not impact taxes (such as when using IRS form 1120-H) I prefer to include minor replacement cost items in the annual operating budget.

Sidney,

What state do you live in? There are many states that have laws about reserves and collections on past due fees. The attitude of your BOD surprises me. They have a fiduciary duty to collect the funds that are due the HOA and part of that is the reserves. If something serious were to happen in your community the homeowners would have to be assessed to make the repairs if there ae no funds in the reserves.

When the BOD is lax in collecting HOA fees, everyone else suffers. As time goes on and bills cannot be paid you are the one who will make up the difference for your neighbors. If they are investors that is no excuse. They are collecting rents. If the renters do not pay the investors, how long do you think they will allow them to live there. They bought into a HOA and should have known the rules. I doubt they are not paying their Visa or American Express bills. Why do they think it's OK not to pay the HOA. If your board does not enforce when the late payments start, it will be even harder to collect later.

Yes, you lien first. If the homeowner shows no action on the lien, foreclose. This is a harsh method of collection but most times it works to bring in the funds that are due. The cost for all collections will be the processing attorneys. He should bill his fees into the collections.