Saturday, August 18, 2012

Saving for a "rainy day": funding community association reserves

Recently I was interviewed for a story in Kiplinger business magazine about what new condominium buyers should be considering prior to making their purchase. The list I provided was long but at the top was whether or not the proposed community had fully funded reserves.

Why is this so important not only to potential new purchasers but to existing owners? Fully funded reserves usually allow communities to meet expected and unexpected financial challenges without the need to specially assess the members. Those communities who had funds in reserve during the tumultous hurricane seasons a few years back fared much better than their reserve-less counterparts.

Still reserves can be a dirty word in associations for some folks. There are those who fear having any sort of money "lying around" for the board to use even though Florida statutes require a membership vote to use reserve funds for non-reserve purposes. There are other people who trust the board but don't trust that they will live to see the benefit of the repairs and maintenance for which the reserve funds are being held.

Both views are, in my opinion, shortsighted and not in the best interests of the membership. A community with full reserves can be a lot more attractive to potential purchasers than a community with older components and no financial cushion. A community with full reserves can also provide much-needed peace of mind to existing residents.

Even folks who understand all the benefits of reserve funding still find themselves confused over the details such as:

What community components merit reserve funding?

What percentage of the membership is needed to waive reserves?

What is the process to waive reserves?

What does it mean to "pool" reserve funds?

What is a Reserve Study and is it really needed?

If you are interested in the answers to these questions, the law firm of Katzman Garfinkel & Berger (my Firm) and Association Reserves are co-sponsoring a Webinar this Wednesday, August 22nd at 2:00 pm (EDT) and 4:30 pm (EDT). Join us from the comfort of your home or office and learn more than you ever wanted to know about reserve funding. Registrants will have the opportunity to participate and ask questions. To register for either time, click this link:

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