The Challenges of Raising Assessments to fund association reserves

As a board president in Washington State, you’ve just discovered that your association needs $200,000 to replace the clubhouse roof due to a leak. Your operating budget has no contingency funds, and your reserve fund, which has not had an increase in many years, has a balance of just $50,000. This situation is not uncommon, and without a proper reserve fund study, many associations find themselves facing similar financial  shortfall.

Raising fees or special assessments is often a sensitive subject with homeowners, and the thought of increasing  dues can lead to resistance and discontent among residents especially those who are on a fixed income. However, without adequate reserves , associations are likely to  postpone major maintenance  which can ultimately impact property values and the overall financial stability of the community.

 

Why are reserves important?
A reserve fund study is a crucial tool for ensuring the long-term financial health and sustainability of an association. It provides a comprehensive assessment of the current condition of the common areas and identifies the anticipated future expenses for major repair or replacement projects. By establishing a realistic and equitable funding plan, reserve fund studies help associations avoid unexpected financial burdens and safeguard the value of their property.

Fiduciary Responsibility and Legal Requirements in Washington State
In Washington State, community associations have a legal obligation to maintain and preserve the property values of their common areas. This includes developing and implementing plans to finance future repairs or replacements of major common-area components. Reserve fund studies play a critical role in fulfilling this fiduciary responsibility by providing a roadmap for addressing these non-annual expenses.

Communicating the Need for Additional Funding
When a reserve fund study reveals the need for additional funding, it can be challenging for the board to effectively communicate this information to homeowners. Effective communication is essential to build understanding, address concerns, and encourage cooperation among residents.

Strategies for Effective CommunicationEstablish open and transparent communication channels: Utilize regular meetings, newsletters, and online platforms to keep residents informed about the association’s financial situation and the recommendations of the reserve fund study.

Provide clear and concise explanations: Break down complex financial information into easy-to-understand terms, using charts, graphs, and other visual aids to enhance comprehension. See an example of our easy to read study here

Address concerns proactively: Anticipate potential questions and concerns from residents, and prepare clear and well-reasoned responses. Encourage open dialogue and address any misconceptions or apprehensions directly.

Seek input and feedback: Engage residents in the decision-making process, soliciting their feedback on potential funding solutions and addressing their concerns with empathy and understanding.

The Role of  Reserve Analyst’s in Reserve Fund Studies
Engaging a qualified reserve analyst to conduct a reserve fund study is essential for ensuring the accuracy, credibility, and defensibility of the findings. Reserve analysts bring expertise and experience to the process, providing valuable insights into the condition of the common areas and the anticipated future expenses.

Conclusion
While raising assessments for your associations reserve fund  can be a sensitive topic, it is a necessary step to ensure the long-term financial health and doing capital projects on time. By effectively communicating the need for adequate funding, engaging residents in the decision-making process, and utilizing the expertise of qualified reserve analysts, associations can successfully implement reserve fund study recommendations and safeguard the value of their property for future generations.