In today’s economic times, maintaining a healthy reserve fund for your association is more important than ever. Many financial institutions are looking into the financial status of the association when a buyer applies for a loan. In many situations an under-funded reserve or no reserve could lead to a bank not approving a loan.

A community association’s reserve fund can be used to cover any number of emergency expenses from sudden repairs to legal costs. In addition, a reserve fund can be used for ongoing maintenance projects or for anticipated future repairs. Having a healthy reserve fund is proof that the community is looking into the future and preparing for large asset replacements that, if not planned for, could result in large special assessments.

One way to get a sense of what your condo or homeowners association should have in reserve is to look ahead at the building’s needs. Many times, reserve studies are done by qualified engineers who are brought in to survey the current assets and where they are in the aging process, thus generating a projection of cash the association will need to put aside annually for the next one to 30 years.

Many board members are unwilling to raise the assessments with fear of getting harassed in meetings from the community. Many Board members run for their position because they feel the association’s money is not being spent properly. Funding the reserve should be one of the main focal points of discussion during budget preparation and should not be looked at as a line item to cut from to keep the assessments the same. Putting off the contributions today will only create problems for future boards.

Do not just wait for a problem to happen, anticipate and make sure that your association’s Board of Directors is doing its due diligence and properly funding for future repairs and replacements of your community’s assets.