Management companies are focused on maintaining the integrity of the communities they serve. One way these teams stay on top of repairs within their communities is through a “Community Reserve Fund”. These funds serve as a plan, so when a repair is needed, there’s nothing to stress about. If homeowners in your community are curious about what goes into these types of funds and their purpose, share these facts below!
- Major repairs and replacements to areas such as driveways, parking lots, street lighting, playground, pool, roofs, and painting are needed every once and awhile. When these occurrences pop up it’s important to have the funds available so there is no delay. Hence, the purpose of preparation and creating these reserve funds well in advance.
- Reserve Funds are not an expense, they are designed to spread out expenses evenly. The funds and specifications should always be included within your associations governing documents.
- These funds minimize the need for special assessments and borrowing. This is one of the most important factors to many association members.
- Possessing an adequate reserve fund is more than providing funds for replacements, these balances can in turn enhance resale value within your community. Many states require associations to share how much money is in the reserve fund.
- Knowing how much money to set aside within a community reserve fund requires a “reserve study”. Within the study they take the physical status and repair/replacement cost of major common areas. Many communities don't take the time to perform a reserve study, and end up needing to issue special assessments to make up for the shortage.
When thinking about creating a reserve fund for your community it’s important to hold multiple discussions with your board and financial professionals. These conversations ensure that the proper reserve study is completed and that all board members are on the same page as far as repair and replacements go.