Condo Association Management Blog

Since we cannot read your condo docs, none of us are in a position to agree or disagree with your board. Based upon my experience as an HOA treasurer, I have never heard of such a requirement. To the best of my knowledge, the owners can approve a special assessment at any time per the terms of their documents. 
 
 
 
You did not mention the reason for your reserves approaching a zero balance. Why has this happened? 
 
 
 
The funds in your reserve account cannot be allocated among each component for which you set aside long term funds. This is why the projected cost and useful lives of each component should be evaluated annually, and the targeted reserve balance should be adjusted. You don't have a "painting account," "roof account," etc. Instead, you have a general reserve account.

How long have the people on the board been running the community?

Before any more advice or suggestions are offered the OP should disclose in which state is this condo. To my knowledge, a special assessment is a completly different concept than reserve funds, which are not to be comingled with operating funds but can be pooled. In some states such as Florida the condo association must keep this reserves funded at all times, however, the membership can opt out of this legal requirement.

A special assessment is used to collect extra funds from the homeowners when the capital reserves are very low.  
 
Capital Reserves are monies allocated to long term goals used to fix common ground components such as roofs, walkways, streets owned by the community, siding, Basically anything that has a longer life expectancy of 10 years or more. 
 
Capital Reserves should not be used for everyday maintenance which are fixing small things that break like light bulbs, siding that can be fixed easily, landscaping, snow removal, insect spraying just to name a few. 

Almost all state legislation regarding condominiums requires reserves to be established and maintained. These reserves as Victor indicated are for long term repairs.  
 
Recent mortgage guidelines, including FHA, Fannie, and Freddie, require reserves be maintained and this information must be provided to lenders prior to receiving loan approval. The guidelines for FHA are very specific in requiring a reserve study and establishment of funds. Without FHA approval, few condo units will sell on the open market. Mortgage lenders must evaluate this in onsidering loans for individuals.  
 
This will create a serious problem for your members. 
 

"A special assessment is used to collect extra funds from the homeowners when the capital reserves are very low." This is not ALWAYS true in Florida.  
 

Our Condo complex ( 3 buildings) is located on the shores of Lake Erie. 
Due to construction defects, we have been chasing water leaks since 1991. 
In 2005 after a complete renovation and new siding and roofs,leaks continued however, don't know the number.The new Board hired an Engineering Company that advised, we had shoddy workmanship and to completely re-do the roofs and siding plus remove windows and re-set them. $2.000,000.00 Money from the Reserves was used to pay for these studies. Our Condo attorney wrote an opinion after the fact that this was acceptable. Many of the condo owners are going to lose their condo.

I have the following question. Are the Special Assessments and Reserve funds to be used only for replacement of Comon Elements like roof, elevators,rizers, structural work like repairs of garage floors? or they can be used also for Limited Common Elements like for replacement of windows and sliding doors? Our Association changed our bylaw just to include limited common elements as a responsibility of the Association and it says that those expenses should be considered as common expenses and since there is not enough money to replace them with the regular condo fees they have placed windows and sliding door as items of our reserve study and according our latest reserve study the windows and sliding doors need to be replaced now. They gave a useful life for our windows and sliding door 30 years bu they want to replace them now when only they have 22 years old. My windows are in perfect condition. Some other owners have difficult to open them and some were damaged because they did not know how to open them. The board did not want that we vote but they were trying to assure themselves that they are following all the procedure so they do not assume any liability. We force them to allow us to vote and we vote but they were lobbing so well that they scare the owners with very high condo fees, etc. etc. so they the Association Board won and we more or les (60 owners) lost from 130 total unit owners. What do you think and please tell us what can we do now. Thank to everybody here. It is wonderful to have this place and get comments and many times find solutions for condominium owners. God bless to all of you.

Yeah, CCR's are generally unclear. In my experience there are a couple of ways to manage reserve funds. The most common way is to have one maintenance reserve fund account that is used to pay for all reserve items. There is no allocation for individual or specific components. This is what I recommend.  
 
However, because some communities have started reserve funds with specific components in mind they allocate funding to those components. Roofs for example. They know there is a roof project coming so they save specifically for that project. When a component is newly added or wasn't included in the original allocation, they don't see funding available because those funds are needed for the allocated component. That would be my guess to explain why they don't want to use available reserve funds.  
 
There are pros and cons with this approach. If all components are included and properly funded for this works. However, if the reserve fund is missing components, underfunded or an unexpected repair/replacement is needed then it really doesn't work.

Ray I have to disagree with you about lumping the reserves into one account.  
 
A professional study should be done to find out how much money will be needed for the reserve items especially if your a new community.  
 
You want to have a cost breakdown for each reserve item for accounting tracking purposes. It can't just be lets throw money into the capital reserve without knowing how much you will need in 20 years.  
 
Throwing money into a pot without basic accounting principles can also be a setup for fraud!

Correct. I totally agree that a reserve study should be obtained and used. I also agree that each item should be identified and each component should have funds allocated to it. This helps identify what the MRC should be.  
 
However, if a new component is identified or needs repair it is acceptable to reallocate funds. Oftentimes this will avoid a SA. Reserve study software does this automatically. Good point though.