Condo Association Management Blog

Is 10% the FHA reserve requirement for condo associations?

We recently sold our Ohio condo and were awaiting title transfer when suddenly we were told the bank would not honor their commitment to our buyer because our 26 unit condo does not have sufficient money in the reserve fund. The unit-owners have always voted to waive the 10% condo association reserve requirement. The loan agent tells us that any loan going through Freddie Mac or Fannie May must meet the reserve requirement. We are also being told that due to new requirements, unless we can sell our condo for cash, we will not be able to sell it at all. Can this possibly be true?

Condo Association Reserve Funds: Use and Regulations

Regarding Reserve Funds: Can the Condo Association Board utilize reserve funds to make needed improvements? Can one reserve fund by reallocated to another to accomplish the improvement? Does the majority of the condo association need to vote to re-allocate funds or can the Board re-allocate the funds as needed without a vote if they make the condo association aware at a monthly meeting? I'm a Florida Unit owner and am not fully aware of the FL 718 statutes or the Florida Administrative Codes regarding use of reserve funds

Is a reserve study required for a condo association or HOA?

Our condo association board has added the cost ($3000.00) for having a Reserve Study in our budget for next year stating that it is "required by the State of Florida". I have been told that we are not required to have done because we are only a 2 story condominium complex and while it may be a good idea to have a reserve study performed, it is only required for buildings 3 stories or higher. Would someone please clear this up for us and is $3000.00 a reasonable rate for a 2 story, wooden structure, 80 studio unit complex with 1 pool & small club house?

How much does a reserve study cost?

How much does a condo association or HOA reserve study cost?

We are an 18 unit condo association in SW Florida built in 1970. Any idea of approximately how much an initial Reserve Study might cost?

How to plan a condo association budget?

I recently purchased a condo in a 2 unit building. The other unit is bank owned and the building does not currently have a condo association.

In order to purchase this unit, we had to become the trustee of the building and head of the condo association. I am in the process of creating a condo association budget and trying to figure out whats costs should be included in the condo fees and what the condo reserve should be for the first year.

Does anyone have any advice on how to go about doing this?

Condo Association Budgets: Reporting Reserves

Our condo association board of directors approved the 2009 HOA Budget and due to issues such as foreclosures, delinquencies, and dropping interest rates, our budgeted amount for reserves was instead used to pay increasing operational costs.

Are we obligated as a condo board to fulfill this budgeted item or just show on our balance sheet that we budgeted for "X" but only received "Y"? What, if any legal ramifications should we consider?

Condo Association reserve study probably needed?

At our annual condo association meeting in August, the condo board presented the next year's association budget. We have 32 owners. The income was $23,000 more than the expenses. The board said this excess will be added to our "savings" to be available for "whatever may come up."

All of our roofing needs to be replaced in 5-7 years. (In 2007 the estimate for that was $88,000.) No estimate was given for that future cost. I wanted a reserve account set up for this. This board said no.

The condo board does not want to "tie up" our savings in any reserve accounts specified for any particular purpose. Our master condo association insurance policy deductible is increasing from $1,000 to $10,000. The condo board wants to be sure money is available in case there is a loss. I wanted to see a reserve account set up for this. The board said no.

We have not had a reserve study done since 1994 either professionally or on our own. I don't want my savings floating around with no purpose so the board can spend it on anything they want without telling the owners first. Do other condo associations have one or many more specified reserve accounts, and if so, what are they designated for? (We do have two months worth of operating expenses set up in a separate designated CD account as per our Bylaws, so at least we have done that right.)

Will condo association reserve investments offset inflation?

When establishing the proper reserves for a condo association, do condo associations or HOAs generally assume the future cost is equal to the current cost and that investment income will cover inflation or should the condo association inflate the base price and reserve for that?

How does our HOA fairly establish annual fees and assessments?

We are in the process of updating our HOA bylaws and establishing HOA fees and reserves. Our HOA is made up of 400 sq ft 1 bedroom oceanfronts; 200 sq ft oceanfront studios; 300 sq ft oceanview studios; 500 sq ft 2 bedroom oceanview; 300 sq ft studios without views.

We need help in figuring a "fair" assessment percentage for HOA fees and reserves. Are there any standard HOA budget formulas to use?  What's the best way to do this?

Condo Association and HOA Lending Trends

As condo association trustees develop strategies for maintaining, repairing and renovating their buildings, more are turning to financial institutions to provide the funds necessary to complete the tasks at hand. Even those condo associations with "adequate" condo reserve accounts are using loans instead of draining reserves. The current thinking is to borrow money for planned expenditures; a new roof, new windows, etc. while saving reserves for emergencies; a heating system that goes bust in the night.

Until the mid 1990s, only a handful of lenders understood this type of ending and were willing to make these types of loans. A condo association loan is not really a "real estate" loan since rarely is any real estate aledged as collateral. Likewise, they aren’t "commercial" loans since the borrowing entity rarely, if ever,
shows a profit, and the balance sheets are never very strong. Condo association loans were the poor orphans that didn't seem to fit anywhere.

This began to change in 1993 when the so called "Condominium Super Lien Law" was enacted. The strength in lending to condo associations lies in the associations' ability to set adequate levels of condominium charges and then collect them from unit owners. The lien law has greatly enhanced a condo association's ability to collect special HOA assessments on a timely basis. In fact, with the help of this law, most condo associations have had great success in reducing delinquent payments to almost nothing, resulting in healthier cash flows and, in many cases, much stronger balance sheets. The ability of condo associations to provide lenders with a very solid and steady income stream to repay debt has attracted many more financial institutions into the condo association loan business.

Learn More About HOA Loans