Reserve study process When a homeowners’ association has a reserve study performed, that study will make an analysis of the physical components as well an analysis of the financial components of the association. The analysis will account for the estimated useful life of a reserve component, the estimated remaining useful life, fund balance for the current fiscal year, contributions and expenditures, and will make recommendations based on at least these factors. Remember that HOAs do not have statutorily required reserve components as do condominiums and cooperatives. ● Any other component, the useful life of which is less than the useful life of the overall structure For any accommodations and facilities of real property timeshare plans located outside of this state , the developer must disclose the amount of reserves for deferred maintenance or capital expenditures required by the law of the situs state, if applicable, and maintained for such accommodations and facilities. If reserves for deferred maintenance or capital expenditures of accommodations and facilities of a personal property timeshare plan are maintained, the estimated operating budget must disclose the methodology by which the reserves are calculated. If a personal property timeshare plan does not require reserves, the following statement, in conspicuous type, shall appear in both the budget and the public offering statement: THE ESTIMATED OPERATING BUDGET FOR THIS PERSONAL PROPERTY TIMESHARE PLAN DOES NOT INCLUDE RESERVES FOR DEFERRED MAINTENANCE OR CAPITAL EXPENDITURES; EACH TIMESHARE INTEREST MAY BE SUBJECT TO SUBSTANTIAL SPECIAL ASSESSMENTS FROM TIME TO TIME BECAUSE NO SUCH RESERVES EXIST. if providing the membership with the option of waiving or decreasing the funding of certain reserves; assisting the board in determining the proper approval method whether it by use of written document such as a limited proxy or by a vote taken at the membership meeting; and the requirement to post such meetings on the association’s website or mobile app.
Reserve funds and any interest accruing thereon must remain in the reserve account or accounts and shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a meeting at which a quorum of the members is present. While a developer is in control of a homeowners’ association, the developer may, but is not required to, include reserves in the budget, unless required by the declaration, articles or bylaws. If the developer includes reserves in the budget, the developer may determine the reserves included. Reserves timeshares Reserves for deferred maintenance and reserves for capital expenditures, including reserves for deferred maintenance or capital expenditures of accommodations and facilities of a real property timeshare plan, if any. All reserves for any accommodations and facilities of real property timeshare plans located in this state shall be calculated using a formula based upon estimated life and replacement cost of each reserve item that will provide funds equal to the total estimated deferred maintenance expense or total estimated life and replacement cost for an asset or group of assets over the remaining useful life of the asset or group of assets. Funding formulas for reserves shall be based on either a separate analysis of each of the required assets using the straight-line accounting method or a pooled analysis of two or more of the required assets using the pooling accounting method. Reserves for deferred maintenance for such accommodation and facilities shall include accounts for:
● Roof replacement ● Building painting ● Pavement resurfacing ● Replacement of timeshare unit furnishings and equipment
Part 3 summary Now we’ve gone over several aspects of the reserves section of the budget. Remember as noted earlier not all budgets will look the same related to the type of association it is, the elements of a particular community. A CAM has a responsibility to use the best practices when preparing or assisting the association in preparing its annual budget. These best practices include assisting the board of directors to deliver and post notice of meetings of the membership
PART 4: INSURANCE
the financial health of a community association due to catastrophic perils. Those perils may be related to damages sustained due to a disastrous storm, flooding, or structural damages; losses of money due to a claim against the association for an individual’s injuries or death; or actions taken against a board or committee or its members. The cost of an association’s insurance policies/premiums are included in the budget as a common expense to members. The procedure for determining the deductible for an insurance policy is determined by the board of directors (unless otherwise provided in the governing documents). Insurance requirements and statutory provisions vary among the types of community associations. Many of the recent changes are discussed in the Legal Update in this CAM CE course. It’s important for directors, CAMs, management firms, and managing entities to consider provisions in the
Insurance is a primary consideration and element of a budget for all types of community associations, therefore in reviewing the elements and parts of a budget we must consider insurance provisions and how it relates to budgets for condominiums, cooperatives, homeowners’ associations and timeshare plans. Over the past several years in Florida, events, such as hurricanes, floods, windstorms, and catastrophic structural events have had an immense impact not only on individual homeowners but also on the community associations. Provisions and requirements have changed significantly for all types of associations and their insurance requirements. Though the specifics for acquiring and maintaining insurance vary among the different types of community associations, one basic premise exists, to protect the safety, health, and welfare of its members while protecting
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