How much should a HOA have in reserves?

We believe that all associations should use a reserve study to plan help for the future expenses they will invariably face. Over the last five years a number of states have taken the proactive step in establishing requirements for reserve studies. The latest addtion to the list of states which now have reserve study related legislation is Maryland. Maryland has now passed legislation that will require condominium and homeowner associations to conduct reserve studies. The new law will require all associations to undertake a reserve study before October 1, 2018 and then every 5 years thereafter.

Reporting and disclosure requirements are in place for both condominium (condo) and homeowner (HOA) associations in Washington State. An association’s board of directors must annually disclosure and provide a reserve fund summary (RCW 64.34.308, RCW 64.38.025) to it’s owners and/or members. The ‘seven part’ information summary should be disclosed as part of the summary of the budget:

The reserve study is a budget planning tool that helps you understand the financial position of your association, and provides an understanding as to what options the association has moving forward. It not only identifies the current status of your reserve fund, it helps establish a stable and equitable funding plan to offset the anticipated future expenditures.