Everyone understands the value and comfort of personal savings when planning for the future. For community associations, those savings are reserves. The basic purpose of a reserve is to plan for known and measurable major repair and replacement and provide adequate funds for projected expenses. Reserve expenses are inevitable and responsible planning for the future requires 
establishing an adequate reserve fund, which in some jurisdictions is required by law. Each association requires a different amount of cash in reserves to perform specific projects on time without special assessments or loans. The reserve fund has a clearly specified purpose and is not a contingency fund for smaller cost items which can be handled in the operating budget.
establishing an adequate reserve fund, which in some jurisdictions is required by law. Each association requires a different amount of cash in reserves to perform specific projects on time without special assessments or loans. The reserve fund has a clearly specified purpose and is not a contingency fund for smaller cost items which can be handled in the operating budget.
Grossly under-funded or low reserve funds can be a big problem as community amenities age. A professional “Reserve Study” provides an analysis of an association’s common element components which allows the Board of Directors to take confident steps toward a healthy reserve fund that reduces the likelihood of special assessments and deferred maintenance problems. The measurement of how well your association’s reserve fund fits its reserve needs requires annual review of cost and timing estimates to determine recommendations of funding goals and investment strategy. An association with an adequate reserve plan is well on its way to financial health and stability.
