QUESTION
How can my HOA not have a reserve fund?
Asked on Jun 17th, 2017 on Real Estate - California
More details to this question:
I went to my prop management co. Of my HOA and they said we don't have a reserve fund just a expense account and it states current balance $37,000, they just sent a notice of an emergency pecial assessment for unspecified area repair costing 10,800 and each member is responsible for paying 6 installments of $100 to cover expense. How can they do this if it says our balance in the trust account is more than enough to cover it?
1 ANSWER
In California, by law, the maximum dues increase per year is 5% of gross expenses, and that increase is spread over all the units. The CC&Rs can provide for a lower limit.
Your HOA Board is required by law, to prepare a comprehensive reserve fund study every three years, and to review it at least once-a-year. If your HOA is not doing this, it needs to get a new manager. He should be making sure this gets done.
After bringing this to your HOA Board's attention, if they don't do it, then you and your neighbors need to run for the Board and put good people on the Board. In many HOAs, no one wants to do the work required of the Board. The volunteers who end up on the Board might not be the best able to do all the work required. Every owner needs a good board to protect the owners' investments.
If that doesn't work, then request Internal Dispute Resolution and then mediation or arbitration, to get the message through to the Board that they don't have any choice. Increases greater than the 5% limit require approval by the owners. Reserve studies are mandatory.
Good luck.
Dana Sack
Answered on Jun 18th, 2017 at 12:48 PM