Monday, 11 December 2017

Ask the HOA Expert: Proper Funding Levels

Written by Posted On Tuesday, 10 October 2017 20:34

Question: Our HOA recently had a reserve study update which the board is evaluating to ensure that we are adequately funded. What is a proper funding level? I have heard numbers from "30% Funded" to "80% Funded".

Answer: 100% Funded is the most fair to all members and should be the goal. For example, if you have a 30 year roof that costs $90,000 to replace, you should reserve $3,000/year to be 100% Funded. Reserving anything less will produce a lower level of funding that will have to be made up in the future by others that shouldn't have to pay it. Being 100% Funded all the time insures that all members pay their fair share.

If you are currently, say, 40% funded, you should institute a plan to increase the level of funding to 100% over a period of years if possible. The board could also special assess to bring it up to 100% this year, although that might be a hard sell unless there is an urgent need, like that 30 year old roof is now 35 years old and leaking like a sieve. Sometimes special assessments are unavoidable because of inadequate funding in the past. But striving for 100% Funding today will eliminate the need for special assessments in the future.

Question: Our governing documents have policies regarding tree cutting and clearing. From time to time, the board gets requests from lot owners asking permission to cut a tree because of fear that it will fall on the house. If there is no disease or damage, we deny such requests. It has been suggested recently that the HOA can be held liable for damage and injury from falling trees.

Answer: The HOA is certainly liable for failing to maintain trees in the common area and should have a regular tree maintenance program to keep trees trimmed, healthy and safe. Trees located on private lots is another matter. If an owner maintains a tree is in danger of falling, it should either be obvious to a casual observer or be documented by an arborist. The board should make prudent decisions based on reliable information and safety concerns.

There is also a fire hazard presented by trees that are closer that 30 feet to the structure, especially if they are highly flammable like pine trees or in areas prone to drought and wildfires. If an arborist believes they are a danger, the tree should be removed.

For more innovative homeowner association management strategies, see www.Regenesis.net.

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Richard Thompson

Richard Thompson owns Regenesis, a management consulting company that specializes in condominium and homeowner associations. He is a nationally recognized expert on HOA management issues.

Regenesis publishes The Regenesis Report, a monthly newsletter for HOA boards, developers and managers. To subscribe, go to Regenesis.net. He can be contacted by email at rich@regenesis.net.

www.regenesis.net

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