The Importance of Reserve Contributions

Often times, homeowners will protest loudly when it comes to funding for Reserve budgets.  Whether simply an issue of cash flow, or the inability to plan ahead, time and time again we have heard from irritated homeowners who would rather opt out of regular reserve contributions.  “How will it help me”, they often ask—“I probably won’t even be living here that far in the future”.  While this may be true, the logic is a bit skewed.  Let’s examine a few of the reasons why:

Equal Usage
During the time of ownership, homeowners are entitled to enjoy safe, working and structurally sound components.  One cannot expect future homeowners to front the bill for this “usage”.  Deterioration occurs on a daily basis, not overnight—particularly with larger more expensive projects such as roof or siding replacements.  And in all fairness, each homeowner​ should be contributing to this usage regardless of the component anticipated replacement date.

Asset Protection
Board members are entrusted with oversight of the community’s assets.  If these assets fall into disrepair, either via lack of funding or simple deterioration, Board members could face legal ramifications.  The last thing any Board member needs or wants is a lawsuit looming on the horizon for failure to adequately protect the community.

Maximizing Investments
Let’s face it, we all know how compounding interest works and there is no denying that a few dollars saved here and there over time can grow into a substantial amount.  The same goes for Reserve contributions—ongoing small contributions can be maximized thanks to interest earnings.   So when a major project rears its ugly head, it can be completed in a timely manner, therefore maintaining or (hopefully) increasing property values.

With the passing of time, more and more states are requiring some form of reserve funding.  In these instances, contributions from homeowners aren’t simply an option—it is something they are legally required to do.