The Short Answer
An HOA reserve fund is money set aside to pay for major future repairs and replacements — roofs, parking lots, equipment, fences. HOAs should conduct a reserve study every 3–5 years to determine how much to save. Underfunded reserves are one of the most common causes of special assessments and homeowner dissatisfaction.
What Are HOA Reserve Funds?
Reserve funds are separate from an HOA's operating budget. While operating funds pay for recurring expenses, reserves are set aside for large, infrequent, but predictable future expenses.
Common items funded by reserves include roofing, parking lot repaving, pool renovations, elevator maintenance, and major landscaping.
What Is a Reserve Study?
A reserve study is a financial analysis that determines how much money an HOA should have in its reserve fund. It inventories all common area components, estimates their remaining useful life, projects future repair costs, and calculates monthly funding requirements.
Why Underfunded Reserves Are a Problem
When reserves are underfunded and a major repair is needed, the HOA has two options: borrow money or levy a special assessment on homeowners. HOAs should aim for 70–100% funded status.
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