How Much is Too Much for the Condo Reserve Fund?

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L.D. from Ohio writes:

Dear Mister Condo,

Our condo community has 40+ units. We have $160K in our Reserve Fund. We recently completed new roofs on all units, all paid for by association funds. Thee is more than enough money in our operating account for the normal expenses (lawn care, snow removal, etc.). My question is should we keep saving when we have so much available and never dip into it as fees take care of all upkeep. Ohio mandates 10% contribution, which would be $5,000 per year. Should we still contribute above that amount when we have so much available? Thank you.

Mister Condo replies:

L.D., a colleague of mine who works in the financial services sector is fond of saying that there is NEVER enough money in the Reserve Funds of most condominium associations. While I tend to agree with that philosophy, you do make an interesting point about how much is too much. Your Board is wise to follow Ohio state law. Here in Connecticut, we do not have such a law but regular Reserve Fund contributions are a best practice that all common interest communities should embrace. I am guessing that the 10% mandatory contribution was arrived at using a statewide average of what reasonable Reserve Funds should look like. For some communities, I would think that to be adequate. For communities with more amenities and common elements, I would think that number could be too low. It really depends on what types of commonly owned items the Reserve Fund is protecting. It may also depend on what future plans the community has. Are all phases of the community complete? Will there be a new clubhouse in the future or the purchase of adjoining property to add trails and walks? Without knowing all of the details it is hard to render an intelligent recommendation for you.

Here’s what I do know. As long as your association is in compliance with local, state, and federal law additional contributions to the Reserve Fund are likely under the association’s control when it ratifies the Annual Budget at the Annual Meeting. If you and your fellow unit owners disagree with the Board’s recommendation to make a larger contribution to the Reserve Fund than most unit owners feel is necessary you can simply vote to not accept the budget as presented. I would encourage you to open dialogue with the Board about your concerns in advance of such a vote so that the Board has an adequate opportunity to explain why it feels larger than mandated contributions to the Reserve Fund are in order. They may have a perfectly good reason for the need that they have not expressed to the unit owners yet. Hear them out and then use your power to vote to get the budget and Reserve Fund contribution that is right for your community. All the best!

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