Reserve Account Questions

I studied this interesting statute section and gave this some thought. I agree with your interpretation.
In my opinion best practices is to have a separate bank account for reserve funds. However I agree it is acceptable to have the operating funds and reserve funds in the same bank account, as long as the books show two different ledger accounts.

I think HOAs should follow the reserve recommendations as closely as possible - if you can't put in the recommended amount, do the best you can (something is better than nothing). You should also keep inflation in mind (which should have also been noted in the reserve study).

Before I moved into my community (and didn't know jack about reserves), the board wasn't putting anything in reserves because our delinquencies were so bad, the most that could be done was to pay the bills, which included paying legal expenses to go after delinquent homeowners. The deposits resumed a few years after I joined the board, but we've been behind ever since, although the delinquencies have improved.

Two years ago, the board decided from now on, assessments would be raised to the maximum allowed before a homeowner vote (5%). I left the board nearly 10 years ago, so I don't know how people responded to that. I do remember that decision was made after an updated reserve study and the specialist made a presentation at our "annual meeting" (didn't make quorum to make it official, but he was there, so we had him do the presentation anyway).

If your neighbors squawk about increased assessments (and some of them will), you'll hear a lot of "I'll probably be done with this community {dead or otherwise} by the time the roofs need replacing or the streets repaved, so why should I pay for something I'll never use?" There are lots of conversations around this website on how the board responded to this sort of talk - in our case, we did a special report in our newsletter some years ago explaining what reserves were, why anyone should care and a highlight (lowlight) of where the community stood financially. Being candid with the numbers will be essential - people may still grumble but at least they'll understand where the numbers came from. Have your specialist attend a special homeowners meeting to explain his/her findings and let people ask questions.

You might also mention Surfside as a cautionary tale in a big way....

Upon further research, this article https://www.oceancitytoday.com/news/ocean-city-condo-owners-face-huge-bills-after-maryland-law-mandates-reserve-funds/article_db312286-6e91-11ee-a676-536c52dc4d9b.html indicates that actual reserve deposits are mandatory and not aspirational budget line items. I think I'll also follow up with the AG's office to see if they can help.

I didn't notice that there were two threads due to a double posting.

From that other thread:

Well, one has to look at paragraph 2 of that statute. Paragraph 2 says:

(2) If the most recent reserve study was an initial reserve study, the governing body shall, within 3 fiscal years following the fiscal year in which the initial reserve study was completed, attain the annual reserve funding level recommended in the initial reserve study.

Based on my reading, and I could be wrong, the association has three years to get to the level recommended in the very first reserve study. After that, the amount budgeted for should be the amount of the most recent study completed in accordance to § 11B-112.3

Keep in mind that budgets are guidelines and not absolutes. If an increase in assessments is required and the membership doesn't support the increase, there is little that the Board can do. What typically gets cut, in these cases, is the amount to the reserves because people would scream if the streets weren't plowed in a snow storm.

As an FYI: Here is a link to the 2022 version of Maryland Homeowners Association Act

The latest version is under Lexus Nexis

Yep, in my reading the law is open for interpretation.