QUESTION: Should an improvement not listed on the reserve study be paid out of
the operating account? We had to modify the drains on a deck above the garage.
the operating account? We had to modify the drains on a deck above the garage.
ANSWER: Whether you pay from operations, use reserve funds, or special assess depends on the cost.
Small Cost. Some components are left out intentionally because, relative to the association’s annual budget, the cost to replace is too small to include in the study. In that case, you pay out of operations.
Moderate Cost. Sometimes components are left out by mistake. If the cost is moderate and the reserve account healthy, reserve funds can be shifted between components and the missing item added to the study.
Moderate Cost. Sometimes components are left out by mistake. If the cost is moderate and the reserve account healthy, reserve funds can be shifted between components and the missing item added to the study.
Significant Cost. If, however, the impact on the reserve account is significant because the cost to repair is high or the reserves are underfunded, the board may need to borrow from reserves and levy a special assessment to repay the account.
RECOMMENDATION: If you use reserve funds previously allocated to other components, make sure you notify your reserve specialist so he can make appropriate adjustments to the study.
Thank you to Les Weinberg of Reserve Studies Incorporated for his assistance with this question.
No comments:
Post a Comment