The Importance of Reserve Funding
Not only is Reserve Funding important to the Association’s future but it now Florida law that reserve funds must be fully funded.
Reserve funding is crucial for organizations, especially homeowner’s associations (COAs), as it acts as a financial safety net for unexpected or future expenses, preventing financial strain on members. Adequately funded reserves ensure that organizations can handle routine maintenance, major repairs, and capital improvements without resorting to costly special assessments.
Funding begins with a Reserve Study.
A third-party group is hired by the COA about once every three years to evaluate the entire community. The report is then written and presented to the organization. The items that are on a timeline for repair, replacement or enhancement are listed with projected costs over years. The total costs are reduced down to a single number which is the total the COA is recommended to collect each year to be able to fill the Reserves.
:max_bytes(150000):strip_icc()/GettyImages-767986903-ce0e9652cd4c4f269f2e8f9813b9d4b0.jpg)
Our 2024 number according to the most recent Reserve Study completed on November 10th 2023 was: $194,000. During 2024 we actually put aside 233,500. Our budget for 2025 has us putting aside $255,000 while the Study recommended $198,000. Needless to say, our reserves are well funded for the future.
The 2023 Reserve Study
The next Reserve Study should be completed in November 2026.
Past Special Assessments
Unfortunately, past Boards did not fund the reserves properly and they chose to vote to delay the funding. This “kick the can” approach does nothing for the Members but create hardships when unexpected projects are needed and there is not enough money to do the work. So, the only option left at that point is to have a special assessment. That process is no longer legal.
When the current Board took over we began filling the Reserve Funds in full immediately even though the law did not go into effect for another two years. That has put our community in very good financial shape for the future.
We had two such Special Assessments before this current board took over in 2022. One in 2020 for $400k (painting and parking lots) and another in 2022 for $880k (roof project).
It is our COA Board’s goal to never have another surprise special assessment ever again.