The Importance of a Reserve Fund

A homeowner’s association reserve fund is absolutely crucial. Everyone knows that having an emergency is bound to happen in the world we live in. Whether it be severe weather, unfortunate community mishaps, or an unexpected break or maintenance issues, there are eventually going to be a reason to use these funds. It is not only wise but also extremely critical for homeowners and the association to consider this a priority. Making sure that the fees can incorporate some sort of reserve funds can be one way that the homeowner’s association can make this happen. Another way could be to have one or two events each year that cost some money but would be used towards that reserve.

Have a thorough reserve study, as it will document exactly what the cost of the repair within the homeowner’s association responsibility would be, when it is likely to happen, and what it will take to fix it. It is a critical part of knowing exactly how much money needs to be in the reserve in accordance with the homeowner’s particular situation.

Dock in Florida


A situation where there is not enough reserve fund could cause havoc amongst homeowners. When the clubhouse roof leaks, the community pool liner tears, the landscape is destroyed by a severe storm, or the park of the community is under construction for upgrades yet something goes wrong, the absent reserve funds will then cause projects to go unfinished, people to become uneasy, and create a lower standard of quality that the homeowner’s association should have. Just as most people have a savings, whether that be months of their salary or at least an emergency fund that might be smaller than the salaries worth, it is critical that homeowner’s association will be wise and really consider the benefits and absolute necessity of a reserve fund.

If an expense comes up that was not previously determined to be used by the reserve fund, it may be used if agreed upon in a meeting. There would need to be a very specific plan in place in order for repayment to not only happen but be a priority for such a case as this though. Therefore, it is best to leave the reserve funds for exactly how it is detailed in the written description outlining how it should be used.
Before you purchase your next home, prudence would show that you get to know the homeowners association of that area before agreeing on a house.  Know the cost of the fees each month, the way that they use their funds what type of  drastic emergencies happened recently, and what reserve funds they  do or do not have.  A homeowner’s association can cause a great deal of frustration should an emergency happen and the association not be prepared.  Like any work or place to live, it is very often the management that makes it or breaks it .  Do your due diligence in order to find out how wise and how prepared  the homeowners association is  at your next home purchase.