Condo Media - August 2022 - 14

Asked & Answered
How Much
is Enough?
Well, That Depends
What is the average
percentage of the annual
budget that is set aside by
condominium associations
for funding reserves?
Having suffi cient capital in a condominium's
reserve fund means that a community is prepared to
make repairs when something inevitably breaks or
wears out. If the roof begins to leak, hallway carpets
are threadbare, or tennis court surface is cracking,
these types of projects would ideally all be paid for by
money that has been set aside in a property's reserve
fund. By establishing and contributing annually to
a reserve fund for those large capital repairs, board
members can help their community and future residents
avoid fi nancial surprises. Well-funded reserves
also speak to the fi nancial health of a community and
have the potential to improve property values.
ANNUAL RESERVE CONTRIBUTIONS
As managers we are frequently asked by board members
and residents how much they should be contributing to
the community's reserve account on an annual basis.
The question always pleases me as it lets me know that
the board is attuned to the importance of setting aside,
or reserving, for the future of their community. However,
the response, " Well, that depends, " can often be
frustrating for those who asked. But like many of life's
important questions, there is no straightforward answer
and thus, no " one-size fi ts all " approach to funding
community reserves. How much money a condominium
reserves is dependent on a variety of factors.
14 CONDOMEDIA August 2022
Condominium communities come in all shapes
and sizes and are as diverse as the many people
that call them home. As such, the financial needs
of one association can be vastly different from
another. A twenty-unit high rise condominium
with underground parking, a central plant, and miles
of plumbing pipes will have significantly different
future funding needs than a 400-unit townhouse
community with a pool, tennis courts, and many
square feet of roofing.
The FHA and some states require that a certain
percentage of an association budget be allocated
to the reserve on an annual basis. At present, that
threshold under FHA guidelines sits at 10 percent
of a community's annual budget. While that percentage
can be an excellent starting point and will
satisfy the requirements of most lenders, there is a
very good chance that it may be insufficient to address
the future capital needs of a condominium.
RESERVE STUDY BENEFITS
How then are board members to know the proper
funding amount to ensure the community is ready
for future needs and replacements? Fortunately,
the answer to this question is much more direct

Condo Media - August 2022

Table of Contents for the Digital Edition of Condo Media - August 2022

Contents
Condo Media - August 2022 - Cover1
Condo Media - August 2022 - Cover2
Condo Media - August 2022 - Contents
Condo Media - August 2022 - 2
Condo Media - August 2022 - 3
Condo Media - August 2022 - 4
Condo Media - August 2022 - 5
Condo Media - August 2022 - 6
Condo Media - August 2022 - 7
Condo Media - August 2022 - 8
Condo Media - August 2022 - 9
Condo Media - August 2022 - 10
Condo Media - August 2022 - 11
Condo Media - August 2022 - 12
Condo Media - August 2022 - 13
Condo Media - August 2022 - 14
Condo Media - August 2022 - 15
Condo Media - August 2022 - 16
Condo Media - August 2022 - 17
Condo Media - August 2022 - 18
Condo Media - August 2022 - 19
Condo Media - August 2022 - 20
Condo Media - August 2022 - 21
Condo Media - August 2022 - 22
Condo Media - August 2022 - 23
Condo Media - August 2022 - 24
Condo Media - August 2022 - 25
Condo Media - August 2022 - 26
Condo Media - August 2022 - 27
Condo Media - August 2022 - 28
Condo Media - August 2022 - 29
Condo Media - August 2022 - 30
Condo Media - August 2022 - 31
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Condo Media - August 2022 - 33
Condo Media - August 2022 - 34
Condo Media - August 2022 - 35
Condo Media - August 2022 - 36
Condo Media - August 2022 - 37
Condo Media - August 2022 - 38
Condo Media - August 2022 - 39
Condo Media - August 2022 - 40
Condo Media - August 2022 - 41
Condo Media - August 2022 - 42
Condo Media - August 2022 - 43
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Condo Media - August 2022 - 45
Condo Media - August 2022 - 46
Condo Media - August 2022 - 47
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Condo Media - August 2022 - 49
Condo Media - August 2022 - 50
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Condo Media - August 2022 - 53
Condo Media - August 2022 - 54
Condo Media - August 2022 - 55
Condo Media - August 2022 - 56
Condo Media - August 2022 - Cover3
Condo Media - August 2022 - Cover4
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