Borrowing from Reserves

Started by EileenS5 • 6 replies • 547 views

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EileenS5 (California)
Posts: 9

Posted:

I live in California. We recently had an emergency that cost us 25000. We borrowed 7000 from our reserve to pay the remainder of the bill and put in a special assessment for one year of 24.75 We received a total back from our insurance company of approx 6,000. A few are saying we need to cancel the assessment since we now have money to pay the remainder of the bill, but others say as long as we use the assessment for what it was intended for, to pay back our reserve, then we are ok. We have very little funds in our both our reserve and operating. The insurance money received could have been for the sewer problem or the damage to the condo. And we don't have a breakdown of what the 7,000 was for. Is it unethical to continue to charge the 24.75 to payback our reserve and use the insurance money to keep in the operating account for future problems, which, by the way, a new sewage problem just popped up yesterday for the price of $2300.

Thank you in advance

ERS

LetA (Nevada)
Posts: 2,679

Posted:

From what you stated, you have bad financials to begin with. I would let the special assessment stand. I would seriously consider getting a current reserve study completed and increasing your monthly assessment until your HOA is properly funded.

MaxB4
Posts: 3,513

Posted:

By California statues, associations are allowed to borrow from their reserves as long as it is repaid within 12 months. In addition, it must have been voted on in open session, with the minutes having noted the repayment agreement.

EileenS5 (California)
Posts: 9

Posted:

Thank you. On May 25, 2021 all this was done. Voting, etc. We decided to borrow 7,000 for reserve with a 24.75 a month or $297 one time fee to make up that 7,000. The question is, since we did receive some money back from the insurance company $4,000 after the vote, is it unethical for us to keep the money in our operating account and continue to repay the reserve account with the 24.75 per month per owner assessment as original states. Some owners are saying that since we received money for the insurance company the assessment is now unethical. Although we only received 25% of the money spent by our HOA. which was 24,000. What is your thought on this?

Thank you all

EileenS5 (California)
Posts: 9

Posted:

Quote:

Posted By EileenS5 on 06/04/2021 4:47 PM
Thank you. On May 25, 2021 all this was done. Voting, etc. We decided to borrow 7,000 for reserve with a 24.75 a month or $297 one time fee to make up that 7,000. The question is, since we did receive some money back from the insurance company $4,000 after the vote, is it unethical for us to keep the money in our operating account and continue to repay the reserve account with the 24.75 per month per owner assessment as original states. Some owners are saying that since we received money for the insurance company the assessment is now unethical. Although we only received 25% of the money spent by our HOA. which was 24,000. What are your thought on this?

Thank you all

MaxB4
Posts: 3,513

Posted:

It is not unethical. You followed proper procedure, not everyone does.

KerryL1 (California)
Posts: 14,550

Posted:

Agree with Max. You've mentioned Davis-stirling elsewhere Eileen. Look at their Title "Borrowing from Reserves" for more.

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