L.R. from Litchfield County, Connecticut writes:
Dear Mister Condo,
Currently, 10% of our HOA fees are put into a Capital Reserve Fund. Some of our units are 12-years old, and the newest ones are 2 years old. Is there a mandate in Connecticut designating what percentage of HOA fees are to be allocated for Capital Reserve? If not mandated, is there a recommendation?
Mister Condo replies:
L.R., I am not aware of any mandate that requires a certain percentage of common fees be dedicated to Reserve Funds but it is typical for association to follow FHA guidelines (currently 10% for condominiums) so that units within condo associations are eligible for FHA-backed mortgages. In my experience, 10% isn’t nearly enough to properly fund a Reserve, especially when a proper Reserve Study shows that the true number is more like 20% to 30%. My recommendation is to have the association conduct a Reserve Study, either professionally or in “Do It Yourself” fashion. Once the true cost of the common elements and likely wear and tear replacement dates are known, the association should set aside an adequate amount for those future repairs which are definitely coming. In a young association such as yours, there is still plenty of time to make sure there is enough money in the Reserve when it comes time for the replacement of the roads, parking area, pool, or other common elements. There is no reason to roll the dice and guess if the money with be there. Plan today and enjoy a better community tomorrow. Good luck!