manager or homeowner leader must be skilled in managing the various hats of the associations and the associations’ needs. Nearly every unit owner will tell you that the association’s financial status, the physical condition of their home, and the community’s appearance are their top concerns for their community. They want to know that the funds are being managed correctly and the repairs are being made to the community to increase or maintain the value of their units.
A
When a property is not maintained correctly, it will inevitably lower the property and resale value for every owner in the community. Failure to make the necessary repairs or updates typically means that homeowner leaders or boards of directors are not holding up their agreed-upon duties as described in their governing documents. Most of the time, it is due to the financial state of the association.
From my experience as a manager, most board members are not elected due to their knowledge of the fiduciary responsibilities and duty of care to the association and unit owners. Generally, they are fully aware of their commitment to being financially responsible, but that can have a very different meaning to different people. To one person, it may mean that they do not raise assessments but get all of the projects done that have been put off for years. On the other hand, it can mean raising assessments and postponing projects until the reserve fund is built up to a different member. Or a new member that does a combination of all of the options. So, what is the correct answer? What is the best way to financially plan for the future of your association?
As amanager or board
member, we are responsible for adequately allocating
the necessary amount of the collected assessments into the RESERVE FUND.
After reviewing reserve studies, it is apparent that they are essential for every association - yes, even homeowners associations (HOAs). Although HOAs may not need them as often, they are still necessary. What are the benefits of a reserve study from a manager’s perspective? First, let’s think about the difficult conversations we must have at budget season. As a seasoned manager, you will realize that “budget season” is all year long. Although, the report and presentation of your data are typically due in October or November (for associations with December year-ends).
The past two years with COVID, rising unemployment, rising inflation, and other significant events affected the amount of assessments that the association can collect. Naturally, the objection that a particular cost or expenditure “is not in the budget” will arise. But as a manager or homeowner leader, it is imperative to see the significance of a reserve study, even in the years when the budget is tight.
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