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By Thomas J. Dolson Vice President, Commercial Banking Leaders Bank, Oak Brook, Illinois


L I The importance of planning and funding reserves f l


One of the most important duties of the board of a community association is to ensure the common areas/elements are in good repair. Depending on the size of the community and its amenities, the cost to repair, maintain or replace these common assets can be significant. The board of directors has a fiduciary responsibility to properly plan for covering these costs. Reserve planning and funding is the tool available to prepare for the future. Why is planning and funding so important?





 assessments.


 dangerous conditions in common areas caused by deferred maintenance.


 available funds for future repairs.


Planning ahead by adequately funding reserves represents the most conservative approach to managing an association. Depending on the age, size and amenities of the association, reserve funding could be critical to the long term happiness and welfare of its homeowners.


 50 | COMMON INTEREST® i d


PHONE A FRIEND (Engineering/Reserve Study Firm)


Every association should very seriously consider having a reserve study completed and reviewing it on a regular basis. This represents the most prudent approach to plan for the  boards to follow. Armed with this important information, the board will know, with some certainty, the useful life of common elements, the estimated costs to repair or replace these items, determine common area/element maintenance priorities and understand what the assessments should be  it is important to review the study regularly as the cost of materials and labor could change and the estimated useful life could be inaccurate. With a good reserve study in place, the board can now build up reserves over many years and always be prepared to make repairs when the time comes. The board members won’t have to worry about approving a special assessment and may have stronger bargaining power when it comes to getting bid proposals from contractors. Building a reserve comes with a different set  funds to get the greatest return without undue risk of loss of principal? Most associations have investment guidelines


A Publication of CAI-Illinois Chapter


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