As every board member should be aware, a reserve fund is a necessity for any HOA. This saved money is meant to cover repairs and renovations when the time comes. In addition, regular maintenance costs are taken out of this account each month, making the reserve funds an essential part of operation. With that in mind, it’s time your board conducts a reserve fund study. As we explore what this is and how it impacts your HOA, ensure your association is backed by an LA HOA Insurance policy.
What is a reserve study?
Essentially, this is an examination of the HOA’s reserve funds and its financial health. They can be completed by any one of the board members, but this task should be reserved for someone who knows the ins and outs of the HOA. The total reserve cash should be evaluated to determine if the account contains enough money to cover repairs and renovations within the set timeline. While the HOA collects money each month from fees, it needs to have enough money to pay for future repairs.
According to HOA Sites Blog, a competent reserve study performed by a professional provides board members with valuable information as they know what to look for and offer helpful advice. It can be difficult to predict what areas will need repairs based on appearance or when the last time any maintenance was performed. Therefore, an experienced professional should be the one to examine the budget and see how much of the reserve cash needs to be spent.
Why does a reserve study matter to me?
If the reserve funds are spent irresponsibly, or if there isn’t enough reserve cash, major projects can be postponed. In addition, homeowners might start to question if their board is representing them accurately if there are project delays or they are unable to complete renovations.
About Scott Litman Insurance Agency
At Scott Litman Insurance Agency, we are dedicated to protecting HOAs like yours. We have a unique understanding of the industry and the common risk exposures that you face in your daily operations. In fact, we find that 90% of the policies we review are missing coverages that violate the Covenants, Conditions, and Restrictions (CC&R), exposing the board, HOA and management to lawsuits – which is why our comprehensive policies are tailored to meet your specific needs at competitive prices. For more information about our products, contact our experts today at (818) 879-5980 ext. 201, or fill out our online form.