SC Reserve Fund and Capital Improvements

Started by CaroleL • 7 replies • 4798 views

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CaroleL (South Carolina)
Posts: 11

Posted:

I am a board of director for an HOA in SC. I am trying to find out if reserve funds can be used for capital improvements for common areas. There is no mention of reserve funds in any of our governing documents. Does anyone know if this is allowed in SC?

Carole

MicheleD (Kentucky)
Posts: 4,491

Posted:

I have a question for you.

What is your understanding of what "reserve funds" CAN be used for?

CaroleL (South Carolina)
Posts: 11

Posted:

My understanding is that they are for repairs to the common areas, ex. repairing a fence, but I am not sure if improvements to the common areas are also included. I have seen some definitions of reserve fund include capital improvements for other states. SC does not have any HOA laws, a bill is pending, but there is nothing right now. Since our governing docs do not reference reserve funds at all, I am unsure of what the definiton is in SC. The reason I am asking is that our HOA has a pond but the only access to it is through swampy water. So, I am wondering if we can use reserve funds to build a boardwalk and small dock area so that homeowners can fish in the pond.

DanielH1 (California)
Posts: 482

Posted:

I don't know if it is allowed in SC but I would think not.

Usually, reserve funding is guided by a reserve study. The reserve study specifies in detail what "action items" the reserve funds are for. An "action item" would include both a verb and an object and a time period. For example, "repaint the fence on 12th Street every 5 years". If something is not in the reserve study, the reserves would not be used to pay for it. Chances are that capital improvements are not anticipated and not included in the reserve study.

GlenL (Ohio)
Posts: 5,491

Posted:

IMO you can't use the funds to build the boardwalk and small dock but only to repair or replace it after it exists. Better to do a special assessment to fund it; once you start playing with the reserves it is too easy to use those funds.

Studies show that 5 out of 4 people have problems with fractions

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By CaroleL on 05/21/2010 10:45 AM
I am a board of director for an HOA in SC. I am trying to find out if reserve funds can be used for capital improvements for common areas. There is no mention of reserve funds in any of our governing documents. Does anyone know if this is allowed in SC? Carole

If there are no restrictions in the Covenants or state law I think you can. Whether or not to do so may require association approval unless your governing documents delegate the authority to the Board of Directors.

GeraldT4
Posts: 1,022

Posted:

Reserve funds are not for repair, they are for replacement of common elements.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Gerald,

Wrong! They are for "major" repair and replacement. Sometimes there's a fine line between repair and "major" repair but it's up to the BOD to decide which to apply and whether or not to use the reserve monies. If reserve funds were to be used only for replacement then assn's with private streets could not resurface those streets (a major repair) using reserve funds.

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