Contribute to HOA reserves as a homeowner, and you’re setting up your community for long-term financial stability. That’s the short reason why members should help build up HOA reserve funds. Your reserve fund contribution not only helps your community thrive in good times. In times of disaster, your reserve contributions also help the HOA get things back to normal. So, why should you, as a homeowner, contribute to the long-term welfare of your community?
Why HOA Members Should Contribute to HOA Reserves
Homeowners have many things to think about. They need to take care of their own day-to-day expenses. They also need to build up their own savings, too. Plus, just like your HOA, they also need to set aside things for unexpected repairs and unforeseen expenses. So, why should a resident also need to worry about the reserve funds of their association?
After all, the regular HOA dues already go to the priority items. So, you have things like utility bills, landscaping and maintenance services, and other expenses that residents already pay for. They also help contribute to the management fees and insurance premiums for the HOA as well. These expenses can quickly add up, and it’s safe to say that most HOA residents are already paying their fair share. So, where does reserve contributions factor in all of these?
What Are HOA Reserve Funds?
Reserve funds are the money, or some other form of liquid asset, saved up in a savings account for later use. Usually, businesses and associations put up HOA reserve funds to be able to meet any expenses that may come up unexpectedly. So, for things like sudden repairs or financial obligations, the HOA reserve fund serves as an emergency source. As such, HOA boards manage the reserve funds separately from the HOA general fund.
HOAs and condominium associations also use HOA reserve funds for planned renovations as well. The accrued funds in an HOA reserve can go towards major projects that the general fund cannot cover. So, for things like large scale upgrades of amenities or community-wide renovation projects, the HOA reserve fund certainly comes in handy. Otherwise, the alternative is to raise assessments – hardly a popular move with the residents. Thus, if your HOA has a healthy amount of reserve funds ready, they can avoid raising assessments entirely.
The truth is that the homeowners association reserve budget is extremely important long-term. That holds for everyone, not just for the HOA board members. Thus, there are several important reasons that everyone should still contribute to it:
Protecting Property Values
Purchasing a home is an investment and a huge one at that. One of the HOA’s reasons for existing is to protect that investment and raise its value as well. The association helps to protect the property values of the neighborhood by keeping them well-maintained and attractive. The maintenance and repair costs that your HOA fees pay for actually adds to the value of your home, too.
Thus, homeowners do their part in keeping property values high by paying towards the HOA reserve funds. Contributing to the reserve budget is a part of maintaining that investment and the value of the property. Even if the owner isn’t going to be living in the property when the reserves are used, they are adding value to future improvements in the community. In turn, that also helps keep the home looking attractive — increasing its chances of potential buyers.
A Sense of Community
Homeowners are all in this together, and it’s not just the HOA’s job to keep the community beautiful. Residents have an important role in keeping the HOA reserves healthy. Failing to see the value in reserve contributions is also missing out on an opportunity to give back to the community. It also means that the owner isn’t thinking about the unfairness of letting new owners cover the costs of needed repairs.
It’s only fair to protect new owners from getting stuck with the high expenses of major repairs, such as a new roof, just because the past owners neglected their responsibilities. After all, the past owners did enjoy the benefits of that roof, and it’s a good thing to be able to pay it forward.
It’s a Mandatory Requirement
Your HOA likely has reserve contributions included in the governing documents stating that they’re required. So, even if a homeowner doesn’t see the value of contributing, it’s likely mandatory that they do if they want to remain in the association. After all, the homeowner agreed to abide by the HOA’s governing rules when they bought their home in the community.
As a board member, you also have a fiduciary responsibility to collect for the reserve. Letting members know that their contribution is required is also part of your responsibility as well.
When you’re part of an HOA board, taking care of the residents in your association is only part of the equation. You also have to maintain the HOA finances, which means thinking about immediate costs as well as thinking ahead and considering any unexpected circumstances.
It’s tempting to focus mainly on the primary operating budget each year without getting homeowners to contribute to HOA reserves. After all, the current costs are more important at the moment. And homeowners are often not excited about contributing to reserves. It’s a common assumption that they won’t still be living there by the time the reserve funds can be used to benefit them. As a member of the HOA board, it’s part of your job to remind of their responsibilities.
It’s Better Than Assessments
It’s simply better for everyone to help the HOA save up bit by bit by contributing to the HOA reserve funds. So, when the time comes that your HOA needs that money now, it’s just a simple matter of dipping into the reserves. It’s certainly more convenient than raising large assessments and asking residents to pay them because you need them now.
Remind Homeowners to Contribute to HOA Reserves
Sometimes, homeowners just simply forget that HOA reserves are a thing. Help them to check out your governing documents if they aren’t sure about how to contribute to HOA reserves. And if you need help setting this up, an HOA management company can help.