From a personal finance perspective, you know the importance of saving for a rainy day in case your car needs a new transmission or your air conditioning unit suddenly goes out. Because we know these things may happen at some point in the lifetime of the item, we plan ahead so we have enough money on hand to cover these somewhat expected (though rarely fun) costs. Just as important as emergency costs, we also try to put aside some money to cover other improvement projects, like adding new pavers or landscaping to the yard in the next few years.
These same planning principles need to be applied to your condo association, too.
That’s where a reserve fund comes in.
Reserve fund monies can be applied to expected deferred maintenance costs that will inevitably rear their heads at some point in the lifetime of the item. Reserves can also be allocated for planned improvement projects. Your job as a board member is to plan for both scenarios by funding your reserves.
As you prepare your annual budget and consider common elements that should be included in your reserves, here are a few items that may be applicable to your condo association:
- Roof replacement
- Parking lot or parking garage resurfacing and maintenance
- Exterior paint
- Major landscaping projects
- New construction or renovation
Most projects that benefit from designated reserve funding are projects costing more than $10,000, though each association has unique needs and priorities. By planning ahead and adequately funding your reserves for these anticipated expenses, you’ll be in a strong financial position when the time comes to make the repairs or replacements without having to levy a special assessment on unit owners.
Planning and calculating reserves is a common topic we hear questions about at the Law Offices of Dania S. Fernandez & Association, P.A. If you need an expert to weigh in on your association’s needs, get in touch with us at 305-254-4492.