HOA Directors Have Multiple Duties Relative to Reserve Funds

A basic duty relative to Reserve Funds imposed on virtually all homeowners associations by state laws and/or governing documents is the duty to maintain the association’s common areas. As the association is merely a legal entity or vehicle for the association to conduct its business, the actions that are necessary to properly operate that business entity are undertaken by the individuals who are elected or appointed to the association board of directors—thus the duty relative to Reserve Funds is to maintain the association’s common areas, falls on the association’s directors.

The basic duty relative to Reserve Funds to maintain the association’s common areas necessitates the proper performance by the directors of multiple additional duties relating to reserve funds that are earmarked to be used for the maintenance, repair, and replacement of common area components. Such additional duties include: (i) conducting reserve studies; (ii) establishing budgets; (iii) levying assessments; (iv) collecting the assessments and funding reserves; and (v) spending the reserves.