HOA RESERVES FOR CONDOS
Government by its very nature is too often reactionary. Something bad happens and society wishes to avoid the same mistake in the future, so our representatives pass laws making it impossible for citizens or corporations to make the same mistakes.
This theory of government seems to play out in the recent changes to RESPA (What’s RESPA, you ask? Real estate settlement procedures act. It governs how real property is transferred, what the time lines are, and what the corresponding paperwork looks like.) With this new “fix” to the old problem, I find myself wondering which current problems will become the focus of future legislation. My bet? Homeowner’s reserves.
Homeowner’s reserves are most often associated with condominium developments. It’s a pool of money each of the owner’s contribute towards the future maintenance of the structure and grounds. Dues and how they are managed are not subject to much legislation (currently). This is where it could get interesting.
What if the chair wants to spend hundreds of thousands of dollars suing the developer, instead of fixing the exterior siding problem? A small example of what can go awry when a board controls you and your neighbor’s money.
What should you do? Make sure your building has a periodic update to its reserve budget, and check out the financials. Who does the books? What have they allotted for and when are those repairs scheduled? Ask questions before you purchase that condo-it will make a big difference to your future.
And then when you do purchase-become an active member of your board-so you can decide where your money is spent.