Reserve funds are the backbone of community associations. It is how they are able to pay for big ticket repairs and replacements. Funding reserves is advantageous to your association for several reasons:
Keep Property Values Up
The biggest reason why you fund reserves is they help maintain and increase property values. It is very difficult to sell a property when the community is in disrepair or a new owner will be inheriting a special assessment. In condominium communities, FHA has to approve communities for their loans and one large factor is how well funded reserves are. Poorly funded reserves limits the potential buyer pool because financing will be harder to obtain.
Maintain Your Community Assets
The whole point of having nice community amenities is to use and enjoy them. Amenities such as the pool, fitness equipment, tennis courts, and shuffleboard courts all have depreciation associated with them. Properly funding reserves keeps them in good condition so you can continue to use and enjoy them.
Maintain a Positive Image of Your Community
Buildings that get routinely painted and that have no highly visible signs of wear are much more attractive to guests and potential residents. In communities where there is a noticeable wear and the buildings appear to be dilapidated, a visitor’s first thought is likely to be “I wouldn’t want to live here”. By appropriately funding reserves and being on a proper paint program, you can keep your buildings looking like they are well cared for and in good condition.
Keep Your Association Running Smoothly
Having a robust reserve balance limits fear or worry when large scale repairs are necessary. Big ticket reserve items such as sea walls, water lines, sewer lines, and storm drainage do not create problems when they have been appropriately planned for years in advance. Conversely, when a main community infrastructure item needs to be replaced or heavily repaired, it can create a huge burden on the residents of the community if the funding is not there.
Eliminate or Minimize Special Assessments
Special assessments are a dirty word in most associations and should only be a last resort. Proper reserve planning will eliminate them. Reserve funding is also the most fair and equitable way to pay for repairs and replacements of items. By levying reserve dues each month or quarter, each resident is assessed for the exact amount of time they lived in the community.