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assessmentsDec 15, 2007


At times I am very confused on the following: some
shareholders say we should have an increase in our
maintance and or an assessment to build up our reserves.
a president of another building said you cannot over
charge just to build up reserves. that reserves are for
unforseen issues or emergencies. Yet some residents
say have an incrase in mainteance to build up reserves.

If we have residents pay to build up reserves for the
future are we not asking current residents living in
building now to subsidy future residents. It is my
thought that if you need a new elevator now you ask the
residents for the money now. Also, if we build up our
reserves and a more aggressive board comes along they could
spend all the money in the reserves on whatever and the
money is not going to be there for the future.

I guess my final thought is what are the requirements
for reserves? assessments? and can we increase mainteance
to put into reserves not earmarked for any project but for
future possible emergencies. Help if anyone can tell me
where to look or how to get this issue straight with my
thoughts. thank you

Join the Conversation Comments (2)
A few suggestions - TedT-NJ Dec 15, 2007



1. The AICPA has a wealth of documents for homeowners associations that will provide excellent definitions and recommendations. To some extent, I am surprised the AICPA is not quoted more often herein. Quite frankly, many cooperatives seem to ignore the good advice and recommendations of the AICPA. In my view, this is how many buildings enter treacherous waters and founder.

2. Oftentimes the proprietary lease and the bylaws have stipulations regarding the need for various reserve funs and yes there are several types of reserve funds.

3. This forum is also a treasure trove regarding reserve funds and one ought to search herein.

4. Your ousted accountant (CPA) firm should also have valuable information.

5. The CAI (Community Associations Institute) website http://www.caionline.org/ is also a treasure trove.

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Some other thoughts - AdC Dec 16, 2007


Ted has good advice.

Just wanted to leave you with some impressions as your statements strike different chords:

1. Flip taxes are also ways of subsidizing future shareholders.
2. If you pay for an elevator now, it has more than 15 years after it is renovated, i.e., you may sell in 3 years and you contribured to 12 more years of useful life for a future shareholder.

In other words, building reserves are not just for your term of occupancy; in fact, having reserves contributes to the overall investment and value of the property and its sellability. A potential buyer will see a building with $1 million reserve fund or reserves in better light than if the same building were to have a mere $70 K in the bank as reserves.

A reserve plan should be ideally supported by a replacement plan. At least, this will help shareholders see the value of builidng reserves.

To think in the here and now is just a condition called Myopia.

AdC


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