We’re a small unit owners association in Arizona. Since the beginning of the association’s inception, we have not maintained a reserve fund, and I’m concerned that this may be a legal requirement here. Is it mandatory to fund reserves in Arizona? Any pros and cons to maintaining a reserve fund?
Currently, Arizona does not require homeowners associations to maintain a reserve fund. However, it is a good idea to do so anyway. Your HOA’s reserves are there to fund any major repairs and replacements in the future. For instance, if you have playground equipment that’s reaching the end of its useful life, your association will be able to pull from the reserves to replace that equipment. This helps maintain the overall character and appeal of your community.
I don’t really see a downside to funding reserves. Perhaps the only superficial downside I can predict others bringing up is that it might affect your assessments. Contributing to the reserve fund means raising assessments a little, and I can see how some homeowners might react to that.