Reserve obligations are the most significant expenditures an Association faces. How does an Association know what these obligations are? A diligent Association will commission a reserve study. A reserve study is based upon the science of anticipating and preparing for an Association’s major common areas’ repair and replacement expenses. Projections are being made about the future through the processes of research and analysis using well defined methodologies.
The good news is that White Mountain Vacation Village has a reserve study which was completed in 2006 and updated in 2012. The board relies on the reserve study to properly budget reserve amounts.
The reserve is intended to cover major common area repair and replacement items. These items are typically a one-time expense versus an ongoing expense, such as regular maintenance. An example of a one-time expense is pond repair. The 2016 reserve budget has $12,566 under that category. The ponds do not require major repairs every year, hence, they are not an ongoing yearly expense item. However, they do fail from time-to-time and call for a substantial repair expense. The reserve is intended to properly anticipate these expenses and assure that the homeowners are prepared to deal with them.
A poorly funded reserve can result in special assessments and deferred maintenance. As the physical assets age and deteriorate, it is important to accumulate financial assets to keep the two “in balance”. A stable reserve funding plan ensures that all owners pay their own “fair share” of ongoing common area deterioration.