Reserve Study

  • Reserve funds are required by association governing documents and, in some cases, by state law.
  • Boards must help owners understand that reserves reduce the need for special assessments and enhance property values.
  • Associations should hire a qualified, experienced professional to prepare the association's reserve study.
  • Reserve studies can be used to assess the real costs of ongoing maintenance of common elements and the energy needed to operate them.
  • Reserve studies comprise two parts: A physical analysis that provides information about the physical condition of the major common-area components and a financial analysis that provides information necessary to maintain the fund appropriately.
  • Reserve specialists should review or update the association's reserve study every one to five years, and the board should review the financial and investment parameters each year as it plans the annual budget.
  • Associations can use one of four reserve funding plans successfully; each establishes adequate reserves that prevent a deficit due to under funding.
  • Boards have a fiduciary responsibility to all owners to make sure reserve funds are invested properly.  To do this, boards should develop and implement a formal investment policy that emphasizes safety of principal, liquidity and yield.
  • Boards should develop investment policies with a clear understanding of types of risk: credit, market, inflation, liquidity and interest-rate risk.
  • Certain types of investments are appropriate for community associations and others are not.
  • Association leaders should develop an investment plan that provides continuity and relative financial safety and helps the board ensure that procedures for managing association finances, reserve funds and cash flow expenditures are firmly in place.
  • Boards must make informed and prudent decisions where to purchase specific investments and who to hire for professional investment advice.
  • Associations should consult a tax professional or CPA since taxes will have a direct bearing on the investment vehicles and investment strategy the association employs.
  • Reserve funds must be accounted for appropriately and accurately in the budget, financial statements, audit and other records of the association according to strict industry standards.
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Sustainable Lifestyles

Maintaining the common elements involves more than simply reconstructing an existing component and restoring it to its original condition.  We've seen tremendous improvements in materials and procedures over the past few years that reduce the cost of maintenance as well as the association's consumption of energy.

Sustainable communities are regenerative, meaning they have "processes that restore, renew or revitalize their own sources of energy and materials, creating sustainable systems that integrate the needs of society with the integrity of nature. 

A core purpose of community associations should be to create sustainable practices and approaches, even in communities without "green" language in their covenants.  Community associations exist to improve members' quality of life because they offer choices, lifestyles, amenities and, most importantly, efficiencies that people value.  Architects, landscape architects and developers initially conceived community associations as places where residents could share resources, thereby saving each member the cost of building amenities themselves such as pools, tennis courts, fitness facilities and recreational activities.

Out of the community association concept came the sustainable idea of saving energy and resources.

What programs have your communities implemented to reduce their carbon footprint, conserve energy, and//or otherwise protect the earth's diminishing natural resources?