Question:
Can special assessments replace the need for monthly contributions to a reserve fund? Is this wise? Does it conform to best practice standards?
– Vincent
Answer:
Hi Vincent,
Kindly review the governing documents to see whether there are requirements regarding maintaining a reserve account. Apart from the community’s requirements in the governing documents, it’s generally best to allot a budget for the reserves instead of relying on special assessments. If an emergency happens, or if there is a major repair or replacement, the HOA may need to levy an exceptionally high special assessment just to cover the cost. This could become a financial burden for the HOA and its members as it’s much harder to come up with a large sum of money in a short time. In contrast, reserve funds may increase the community’s monthly dues, but the fees are smaller and may be spread out over a longer period.
Disclaimer: We are not lawyers. The information provided on this website does not constitute legal advice.
