HOAs Must Follow Proper Procedures for Temporary Use of Reserve Funds to Pay Operating Expenses

State laws and association governing documents mandate that homeowners associations maintain sufficient funds in reserve to allow for specified items such as the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components that the association is obligated to repair, restore, replace, or maintain. Recognizing this, state laws and association governing documents also contain specific provisions pertaining to the use of funds that are held as reserves for any other purpose than those specified. These requirements are necessary because a properly funded reserve fund is critical to the financial stability of a homeowners association.