A Study on Reserve Studies and Policies

A new year often sheds new light on homeowner association (HOA) goals for the year. One of those important elements of any homeowners association governance is managing the reserve fund and the accompanying reserve study that determines where and how those vital funds are spent for capital improvements.

Homeowners associations in Colorado are required by law to include a reserve study policy in their governing documents under the Colorado Common Interest Ownership Act (CCIOA). One of the benefits of being an HOA member is knowing that capital improvements are handled by the HOA board of directors working in conjunction with the management company. Hard-working Warren Management manages that process including coordinating the reserve studies and any subsequent repairs.

One of the HOA’s most important responsibilities is to make sure that sufficient funds are accumulated and set aside for keeping the common property (roofs, paving, heating and siding) in workable and safe condition. The reserve study, performed by a company specializing in this function, conducts on site investigations to identify specific, required repairs and improvements and then submits a cost estimate. That estimate might include deferred maintenance items such as periodic concrete replacement, signage replacement, fencing and walls, or asphalt resealing. Added facilities and community upgrades also may be suggested. It should be easy to follow by a layman not familiar with construction and show amortized amounts each owner should be paying monthly into the reserve account to pay for any plan the board has adopted. The reserve study then becomes a guide as to what direction the board may take in complying with the HOA reserve study policy.

Colorado law dictates that reserve fund monies must be separate from the HOA’s operating income and expenses and the net flow is kept in an equity account that balances with the reserve fund. Projects paid for by the reserve fund are approved by the board and ratified by the HOA membership. As your management company, Warren Management is tenacious in keeping accurate and current records for all the HOA’s accounts.

Though there is no specific minimum reserve fund amount required by the Colorado statute, HOAs can, and do, collect periodic interval payments as a portion of regular assessments. This helps to alleviate the need for special assessments. However, many HOAs practice a funding plan that is less than 100% of being fully funded which likely will result in additional assessments. An empathetic management company will work with the board to find solutions that reduce the impact of additional homeowner expense.

Just as an HOA board has to be responsive to its members, your management company should be responsive when assisting on the reserve study, funding accounting and repair work. In working with Warren Management, a company known to be authentic and effective, your board will be able to maneuver the nuances of reserve studies and funding with efficiency and accuracy. Give us a call at 719-534-0266 and we will guide you through.

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