Reserve Fund – How to Get Community Support

Your association’s reserve study is complete.  You have identified the useful life, replacement costs and any significant repair costs for each common component owned by your community.  Based on this information, you have identified what amount you will need to collect each year from homeowners.  However, your bylaws require that increases in assessments must be approved by the majority of households.  So now what?

You will need to gain support for increased assessments in order to fund your community’s reserves.  This can be a challenge for small, self-managed homeowners associations.  If you are just now taking the steps to build a reserve fund, chances are many homeowners are not aware of what common elements they are part owners of.  While it will take patience and perseverence… gaining support from the majority can be accomplished.

Establishing support for a reserve fund is much like launching a ballot campaign.  There are three areas on which you will need to focus:  Education, Lobbying, and Voting.

How to Get Community Support for a Reserve Fund

EDUCATE

Inform all homeowners regarding what common elements they are responsible for.  Create a “Did You Know?” flyer that outlines what each homeowner is responsible for and be sure to attach documentation (plat maps, CC&Rs, etc).  For example:  Did you know that you are the proud owner of:

  • 1/68 of the Pool
  • 1/68 of Pine Street
  • 1/68 of the Retention Pond and Storm Water System
  • 1/68 of the Community Septic System

LOBBY

Effective lobbying usually requires more than one face to face meeting.  Plan a community meeting and if possible have “experts” in the areas of road repairs, storm water management andseptic system management attend.  Encourage the homeowners to ask the experts questions.  You may want to come prepared with important questions too.  For example, ” if we defer this expensive repair, what will happen?”  Homeowners need to understand that deferring repairs and maintenance almost always cost the homeowners more in the long run.

Create flyers with some of the questions and answers from the meeting.  Take the flyers door to door and follow up with neighbors encouraging them to vote.  Be sure to clearly outline various scenarios and comparisons.  Take the extra time to make sure your flyers are brief and easy to read, but also clearly make a strong case for building reserves.

For example, if more costly deterioration will likely result from deferred repairs.  Say so.   Many communities cannot defer maintenance because environmental laws prohibit this.  If there are ordinances that require the expenditure, provide the copy of the ordinance.

Red checkmark on vote checkbox, pen lying on ballot paperVOTE

Conduct a vote as outlined in your community’s governing documents. Unless otherwise prohibited by governing documents, it is OK to state clearly what homeowners are voting on, what the impact will be, and what the board recommends and why.

Ballots might read:

____ Option #1.  Increase assessments by 20% for a reserve fund.  (Equates to an additional $10 per month) To be used for large repairs and equipment replacement for streets, storm water and septic system repairs.  Option #1 is board recommended.

____  Option #2  Do not increase monthly assessments.  I would rather be charged a special assessment at the time repairs or replacement is needed.  The board does NOT recommend Option #2 for the following reasons:  We have no exact idea when equipment may fail.  Collecting a special assessment could delay repairs until the money is collected.  Each homeowner could be assessed up to $1500 at the time repairs are required.

In the end, there will always be a few homeowners who will not support building a reserve fund.  Typically these are homeowners who view themselves as “short-term owners”.   They hope to sell their home before a special assessment is required, pushing the liability off to the next homeowner.  It is important to note that a healthy reserve fund is an excellent selling point for a prospective buyer.  Who would buy a home knowing a large special assessment was looming in their future?  Every homeowner benefits from an established reserve fund.

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