Where's the Money? Alternative Funding for Capital Improvements

As readers of this publication surely know, well-run condo buildings and HOAs need to have adequate amounts of money in both their operating funds and their reserve funds.

The operating fund covers most of the day-to-day costs of running the property—items like insurance, gardening, management fees, legal fees, paying vendors, staff salaries, purchasing supplies and other expenses that occur on a regular basis.

Reserve funds, on the other hand, cover the repair or replacement of major common elements, from HVAC systems and boilers to roofs to major landscaping projects to repaving roads. In today’s economy, maintaining an adequate reserve fund is more important than ever.

Be Prepared

Some associations vote to waive fully funding their reserves. They may say, “Oh, the odds are that this new air-conditioning system won’t break down any time soon,” but if it does and they’re not prepared, they’re going to have a problem. Also, some items—even if they may seem totally adequate now—may become obsolete in 10 years because of advancements in technology, mandating new expenses by the association to keep things up-to-date.

Reserve funds are so important that this writer recently heard of several cases in which well-funded reserves were touted as major sales points for prospective buyers.

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4 Comments

  • Can you tell me if there any grants available for condo association for repairs and upgrades to community
  • We have reserves for roof, paving and painting. We also have insurance. athe roofs were damaged and took all of the money. when the insurance check came the board used the money to fix thing in the clubhouse, added some to the operating fund. and other things. When the check comes doesn't t specifacly state what damage it is paying for. They did not replace the reserves
  • We are victims of the very problems being sited here.A community of 68 units , 8 buildings 32 years old, with adequate reserves except roof. over the years the roof reserve was used for repairs and now we have nothing left in it . We contracted a general contractor for a monthly retainer to keep the roof in adequate shape. The roofs are in good shape but some members are insisting we should replace the roofs because of their age. The cost would be at least 2k and there is no way the community could survive such special assessment. This will probably be the end of our community.ANY SUGGESTIONS OR COMMENTS?
  • In my previous comments I met to say new roofs will cost 2 million.