What Should Reserve Funds be Used For?
Reserve Funds

What Should Reserve Funds be Used For?

Reserve funds can be used only for repair, maintenance or replacement of the parts of the property that the association is responsible for such as roads, roofing, siding, fencing, painting, and equipment replacement.

Reserve funds are often misunderstood as a slush fund that is to be used on a rainy day’ when cash gets low in the operating account. These misconceptions can often be compounded by the well-intentioned but misguided attempts by some to keep the association fees low.

Equipment and major components within an association must be replaced from time to time, regardless of whether we plan for the expense. By having a plan, the association can be much more prepared for these large expenses when they come. The plan provided by your reserve fund specialist will help you in this process. It is much more preferable that homeowners associations have a plan to set the funds aside now, on a year-by-year basis. By doing this, the association can spread out the collection of assessments for these expenses more evenly over the years. Remember, reserve funds are not an extra expense.

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