Condo Bylaws Association With No Reserves In Phoenix
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FAQ
On average, The Board should be setting aside 15% to 40% of their total assessments towards reserves, although for some simpler situations, a more minimal reserve fund ratio of 10% to 15% may be sufficient. Develop a funding plan that aligns with the calculated reserve fund requirements.
A reserve study provides a current estimate of the costs of repairing and replacing major common area components (such as roofs or pavement) over the long term. Ideally, all major repair and replacement costs will be covered by funds set aside by the association as reserves, so that funds are there when needed.
While there is no ideal funding level, having adequate reserve funds to replace reserve components as they are due over time is the goal. For instance, if an association has a 75% reserve fund level, they can only replace 75% of their reserve components as they become due.
A reserve study is a long-term capital budget planning tool which identifies the current status of the reserve fund and a stable and equitable funding plan to offset ongoing deterioration, resulting in sufficient funds when those anticipated major common area expenditures actually occur.
Achieving a 70% funded reserve is considered a milestone for inium associations, indicating a reasonable level of financial preparedness. It signifies that the association has taken proactive steps to ensure the long-term sustainability of the community and mitigate the risk of financial instability.
There is a distinction between “Reserves” and “Maintenance Expenses” which are part of the yearly operating expenses, like lawn maintenance. “Reserve Contributions” are accumulated for years until the component needs replacement or renovation.
For iniums, such expenses are funded through reserves. To obtain FHA approval, a inium association must allocate at least 10% of its budget to provide funding for replacement reserves and capital expenditures.