Even though energy costs have increased significantly, condo conversions have boiler systems getting old, etc. Board members are reluctant to increase monthly dues. This causes reserve accounts to bec

Developing a reasonable reserve account is important for the ongoing success of associations. Without adequate reserves, associations are often unable to fund future repairs and replacements which, although not urgent today, are necessary tomorrow. While some boards do not want to fund the reserve by raising assessments for fear of upsetting homeowners, complaints typically start rolling in once the roof leaks, the pipes burst, and the board has to levy a hefty special assessment to fund the repairs. Failure to adequately fund the reserve could potentially lead to liability for the association and board. Maintaining an adequate reserve not only meets the board's fiduciary responsibility, but it increases board credibility, reduces special assessments and improves resale value. While there is no statutory requirement for a reserve in Colorado and associations may choose to special assess rather than establish a reserve (unless the governing documents require otherwise), establishing a reserve is the recommended approach. Reserve expenses are inevitable; therefore, plan accordingly. For further information click here to read, “Best Practices Report #1: Reserve Studies/Management", published by CAI.

Community Essentials - July 2004