Understanding the Proper Use of Homeowners Association Reserve Funds

The use of homeowners association reserve funds is a topic of much confusion and controversy within homeowners associations. Because of the importance of maintaining proper levels of reserve funds, they are afforded protections by state laws and/or an association’s governing documents and HOA board members and management personnel should be familiar with all requirements that are imposed on the use of reserve funds before making decisions relative to their use.

What are reserve funds?

It is critical to understand that an association’s reserve funds are not to be used for the payment of normal recurring operating expenses of the association. Reserve funds are funds that are set aside in a separate account (reserve account) that is established as a source of funds that are available for specific purposes of repair, restoration, replacement, or[…]