Is a "reserve study" legally mandatory?

Our community is a small one (90 units) in Central Florida; 2 years ago the swimming pool was closed because of licking problems etc, the board said they did used to much money to fix it; then we got a letter were they told us that if we wanted the pool open every body will have to pay $500 not our regular dues, of if not they were going to closed the pool and fill it with dirt. You imagine the problem that such a letter caused, as a homeowner i was seriusly concern and decide to get involve, many of us request ( actually demand) an especial meeting, were we ask "were the money went?.We found out that we were paying a person to clean the pool ( even when the pool was close) and $800 bills in water from a pool that was leaking ( no one have the sence of calling the water company and turn the water off)Any way we end up having whole new board ( me as president) We have been working really hard to get the pool open again, we save enough money now to get the pool in order;Our annual meeting is comming soon, I will like to know about "reserve studies" are they mandatory? why the former board did not have one? because the pool got in such a poor state due to lack of funs to properly mantain; how can we the new board be prepare for the future better? We believe the former board did not have a real interest in keeping the pool running, but when you leave in Forida and when you have kids I think a swimming pool is very convinient.What are the pros and con" of a swimming pool? THANKS FOR YOUR HELP,Yoli

Yolanda: I live in South Florida. It is not mandatory to have a Reserve Study, but it is a good idea. This gives you an idea of how much money needs to be set aside for repairs of major items, such as pools, clubhouse roofs, etc. Sometimes you need a "special assessment" to pay for things that you don't have in your budget. I think 90% of communities in Florida have swimming pools or otherwise nobody would want to live their. Good luck to you...

Samuel, the cost of a reserve study "worth its salt" will vary depending on the number and complexity of the capital investment items involved. Some single family HOAs with limited amenities do their own at no cost. For a 20 year reserve plan the charge is $300 the first time with free updates every three years for the HOAs we manage. Independent professional firms range from $X,000 to $XX,000.

RogerB

THANKS A LOT Roger we really apreciate your experience and advice. At the moment we have all the money need it to fix the pool to be open this summer ( we kept the budget as if it was running, so we save all the money for the pool) but I want to make sure this problem NEVER happen again, the old board did not have any plans for the future. Is the having of a pool affect the value market? once again THANKS,Yoli

Samuel, I agree with you. To pay $4,500 to $15,000 IMHO is not warranted. I'll bet most associations have a member who can create a budget, estimate current cost of each captital investment which will be needed and when, and account for inflation over time. Armed with this, they can create a sufficiently accurate reserve study to estimate how much of the annual assessment should go into a reserve fund. A reasonable estimate of reserve needs is necessary in order to establish the annual assessment.

RogerB

It depends on your legal documents and your state rules. Colorado just passed a sweeping change of the HOA rules, and one of the changes is that a HOA have a initial reserve study and one every 3 years there after. Check out your state rules. One thing that has really helped our association is that we hired a Law Firm that specializes in HOA law. We have them on retainer at $140 a month and all phone calls are free. Research on more complicated issues is on a reduced fee basis and is working very well for this Board. We have also turned over all of our delinquent dues collection to them and in 2005 we reduced or delinquency rate from 15% to 5%. and one thing that the attorneys and this board did was to start a forclosuer on a home because of excess dues delinquency ($450.00). When that word spread through out the community, a lot of dues started to be brought up to date. We also passed a stiffer penalty for delinquency. Our penalty is $25.00 after the 10th of the month on a $28.00 dues assessment. Almost doubling their dues assessment and that also has helped.

A reserve study is one of the most important things that a association can do for itself. If my association did not approve the expenditure for a reserve study this year, which they have, I was planning on selling out in the near future. I do not want to be around when the Board has to send me a onetime special assessment of several hundred dollars when every member should have been paying a couple of bucks each month all along. This year our annual budget was approved with an attachment that stated our dues are $28.00 for now, but when the reserve study is completed the dues would increase by the studies recommendations.