Question: What percentage of our HOA fee should go toward funding our reserves?

Answer: Oh, that it were so easy. Reserve funding plans are derived from an analysis of the current balance in reserves, the yield on invested funds, the rate of inflation, the components, their life cycles and current cost of repair or replacement. The various factors can skew projections a lot and, to make matters more complicated, underlying assumptions can change every year.

A reserve study is a "living" document since much of what drives the funding is changes over time. Without a comprehensive analysis of reserve needs by an informed consultant, the board will never have the proper information to determine how much money needs to be collected to pay for reserve events. Putting 10, 20 or 30 percent of the HOA dues into reserves is meaningless unless this amount truly addresses the need.

There is no one-size-fits-all formula for reserves. A custom reserve analysis is needed followed by an annual review and update to tweak the assumptions that have changed.

Question: Our HOA was built in the 1970s. Should we reserve for things like landscaping and trees?

Answer: Landscaping is one an HOA's biggest assets and has a significant impact on home values just like paint and siding. And like paint and siding, landscaping wears out by dying or overgrowing its location. Similarly, landscape design preferences change over time. Thirty years ago, extensive lawns were popular. Now, planting beds with colorful native drought resistant native species are the norm for both curb appeal and lower maintenance.

So, yes, reserving for landscaping and trees is appropriate. Reserves can be accumulated to maintain what you have or to renovate and replace it with a new design if appropriate. The older the HOA, the more likely an overhaul is due. A landscape design architect can provide the design and specifications needed to bid a landscape make-over.

Question: Our members prefer to fund reserves by special assessments instead of regular monthly contributions. What are the pros and cons?

Answer: Special assessments are always unfair to some or many of those that have to pay them. A fair funding plan distributes reserve costs to those that get the use and benefit of the reserve components. Since HOAs are made up of moving parts (owners buy, owners sell) that can change many times each year, unless reserve funds are collected monthly, some owner in the future will be required to pay an obligation that rightly belongs to a former owner.

Special assessments are always unpopular so many boards delay imposing them which often contributes to additional and expensive repairs like dryrot.

Some special assessments may be uncollectible. There is always some owner that is out of work, on a fixed income or having financial difficulty. If one or several owners don't pay, others must pay more to raise the money needed to pay for the repairs.

For reasons of fairness and ease of collection, it's much better to collect smaller, adequate and consistent amounts for reserves.

Question: We have ten different condominium buildings and the board is thinking about breaking up painting into five different years and phases. Thoughts?

Answer: It is not a good idea to break up painting the buildings into phases for a number of reasons:

1. The buildings will be upgraded at different times and create a value disparity in the units. Buyers perceive newly painted units as more attractive and, thus, more valuable than those that have older paint. Painting all buildings at the same time will eliminate that disparity and the griping that always follows from owners who don't like paying to improve someone else's unit.

2. Painting contractors offer better per unit pricing for bigger jobs. All contractors factor in job set-up costs. If there are five phases, you are paying five times the set-up expense. Do it all at the same time and get much better pricing.

3. If you have five different painting phases, you will have five times the disruption. Do it all at once and get it over with.

For more Ask the HOA Expert, see Regenesis.net .