COVID-19 has brought its fair share of economic hardships to individuals across the world. Community associations haven’t been neglected in this sense. Some communities have seen an increase in expenses from difficulties collecting assessments, and increased cleaning protocols. Many communities are now looking for advice. Specifically, when and how to spend community reserve funds.
Normally reserve funds have restrictions, and are prepared for expenses communities will incur in the future. However, with the hardships people are facing today some have considered using these funds to address budget gaps.
Communities create reserve funds to minimize the chance of the association having to collect “special assessments”. Special assessments can be seen as a burden to many homeowners, and creating a reserve fund can help spread out costs. Special assessments are actually a major reason why people don’t want to live in a community where an HOA enforces bylaws. These reserve funds are planned by boards and management for repairs, replacement and maintenance of community areas like pools, sidewalks, and roofs.
Communities may use these reserve funds to address budget gaps for several reasons. One of them being that borrowing reserve funds is often quicker than issuing a special assessment. It’s important that communities seek professional advice before making a decision about how to implement these reserve funds. Boards should also take a look at what might need to be repaired in the short term.
While utilizing reserve funds to address budget gaps may not be ideal, many communities might not have a choice when it comes to taking care of new and essential expenses.