Blog

What’s Best for Your HOA Reserve Funds? 
By Lisa Beaty & John Polovick

For HOAs, financial stability and long-term planning are crucial. Funds often sit idle in low-yield accounts due to a lack of proactive investment plans and challenges from regulations like the Davis-Stirling Act. An effective strategy should prioritize both security and growth. U.S. Treasuries, especially T-Bills, provide excellent liquidity, allowing for quick access to funds. This is crucial for funding emergency projects or complying with California’s SB 326. Investing in T-Bills helps HOAs not only protect their funds, but also may increase yields over other available alternatives. This approach ensures that funds set aside for SB 326 are secure while generating higher returns, balancing reliable income with the immediate liquidity needed for urgent financial needs.

THE APPEAL OF U.S. TREASURIES AND CDS

U.S. Treasuries: Introduced in 1913, U.S. Treasuries are...

Understanding the Terms, the Funding, and Why They Matter. This article first appeared in the Summer 2024 Edition of The Communicator Magazine. 

By Zer Iyer, Esq.

RESERVE STUDY. The term is common in the HOA lexicon. Managers know their associations need them. Board members know they need them. But what is a reserve study, really, and why are they getting so much attention now? Well, it all comes down to – what else – money. Due to the number of unanticipated expenses that associations are now facing, (think: aging communities, increased insurance premiums, inflation impacting just about everything), financial planning for communities has never been more important, and reserve studies are the most effective financial planning tool associations have. Understanding what reserve studies are, how they operate, and the role they should play in an association’s budget is no longer something that only experienced or senior community managers need to...

By Clifford Bates

Is a reserve study a science or an art form? I say it is both. The Cambridge English Corpus states, "Science shows the unity, while art shows the diversity of the riddle which we call the world." So now we have introduced a "riddle," which is defined as, "A baffling, misleading, or puzzling question presented as a problem to be solved or guessed." It appears that I am not making the concept of reserve studies any clearer to the reader, but stay with me and I will explain.

You do not have to look very far into the history of homeowner association management to see the birth of reserve studies. There was a time, not very long ago, when neither the governing documents nor the regulating agencies had any requirements that were to be adhered to regarding long-term maintenance, repair, or replacement. As the concept of identifying future, long-term costs for repairing and replacing common area components for aging facilities became more customary and accepted...

…and Preparing for the Unknown

By Kumar S. Raja & Shelby D. Bennett

Throughout the state, many older common interest developments (CIDs) are struggling with costly repairs and large maintenance projects as buildings age. Is your CID prepared to replace major components without a special assessment? Do you have funds available to finance a roof replacement project? This article will review the importance of adequately funding reserves and identify future considerations that might impact current planning.

SETTING MINIMUM RESERVE REQUIREMENTS

California law requires that CIDs conduct reserve studies every three years – and yet it does not set forth minimum funding requirements for reserve accounts. This means that a CID can conduct a reserve study and still not be prepared for replacing major components, such as common area roofs and structural components. The law provides some direction regarding reserve account maintenance. In short, boards must...