R.B. from Litchfield County writes:
Dear Mister Condo,
Mister Condo replies:
R.B., at this time, there is no state law mandating that common interest communities like condominiums, co-operatives, time shares, or homeowner’s associations (HOAs) make minimum annual contributions to their respective Association Reserve funds. And that’s probably a good thing as most common interest communities would not welcome additional governmental interference into how they conduct their business affairs. However, as more and more common interest communities age, there will be more and more cases where the association did not make large enough contributions to their Reserve Funds over the years and when the time comes to replace common elements like siding, roofs, roads, and such, the associations will find themselves needing to raise cash which they will do by either taking a loan if they are eligible or levying significant special assessments against unit owners. In the worst of scenarios, the unit owners of record at the time of the special assessment may not be able to afford the assessment which could lead to foreclosure on their units by the association. You can see where this is a patently unfair scenario. Depreciation of common elements begins as soon as the community is built. Unit owners from that time forward should be paying their fair share of the depreciation in the form of adequate contributions to the Reserve Fund. After all, they are the ones who are benefitting from the use of the common elements as they deteriorate. Flash forward 20 years and a newer owner is the one who gets stuck with the bill. If this happens enough and lawmakers get wind that this unfair practice is running rampant in the state, I wouldn’t be surprised to see legislation that mandates a minimum amount (perhaps 10%, which is the current FHA guideline for common interest communities) but that number is just one that is easily measured and truly does no justice to the unit owners who will likely find that to properly fund their Reserve Fund a complete Reserve Study should be performed and adhered to so that there is money available for capital improvement projects when the time comes. It also assures the community of sound fiscal standing which is a great advantage to unit owners when they wish to sell when presented properly to prospective buyers. Thanks for the question!