Law & Logic of Homeowner Association Capital Reserves

In October 1999, Oregon was one of the first states that enacted a significant improvement to its Condominium and Planned Community regarding capital reserve planning, a process by which homeowner associations plan and fund future repairs and replacements. For many associations, the process became mandatory although there was an "escape clause" for pre-October 99 Oregon communities.

But there's more to reserve planning than The Law. Where statute stops, the Board's "fiduciary" duty kicks in. A "fiduciary" is one who is given the trust or confidence of another. The Board is entrusted with care of the biggest single asset that most people own, their homes. These people have the right to expect the homeowner association to be run like the business that it is...a corporation often responsible for millions of dollars in assets.

The reserve study concept was developed during the 1980s as a result of the many aging homeowner associations that found themselves in dire straits due to failure to plan for reserve expenses. The homeowners expected the Board to plan for such events and all too many had no plan other than "dealing with it" when the time came. Well, those "times" came all too soon and inevitability lived up to its reputation. Thus, the obvious need for long range planning came about.

Reserve studies analyze and predict the cost and timing of future repairs of association maintained components like roofing, pools, paving, landscaping, painting, fences, decks and other items that have a useful life of between 3 and 30 years.

The typical condominium association has between 15 and 30 items that fall under the "reserve" definition. When the repair costs of these 15-30 items are added up, it usually amounts to hundreds of thousands, even millions of dollars. This is not chump change. It takes careful planning to accumulate the funds plus know how and when to spend it. That's what reserve planning is all about.

Reserve plans require all owners to pay a monthly share of future repairs and replacements. These payments pay for assets that are being used up. If an owner sells, the next owner picks up the monthly share. All owners pay a fair share and no more special assessments! This is as it should be. If you've been thinking there's a better way to manage association assets, there is: It's called a Reserve Study. Whether by law or logic, it's time your homeowner association started doing business like a business.

Neda Dabestani-Ryba is a licensed Realtor in Maryland. She is a member of the President's Circle of Top Real Estate Professionals. She can be reached at (800) 536-3806 or visit her website for more information: http://neda.dabestani.pcragent.com/

Prudential Carruthers REALTORS is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Equal Housing Opportunity.

---

Working With Your Real Estate Attorney

Purchasing or selling a home will probably be one of... Read More

Young Couple Buys Ranch with Government Money

Kirk and Tina Sczepanik had a dream. They wanted a... Read More

Do You Have the Correct Home Buyer Mindset to be Buying a Home?

By learning what you need to know and preparing how... Read More

Equity

Equity is the value of your home minus what you... Read More

A Powerful Suggested Technique for YOUR Home & Property Search

A Powerful Suggested Technique for YOUR Home & Property Search... Read More

Tax Free Exchanges: Watch out for the New Residence Rules

On October 22, 2004, President Bush signed tax legislation that... Read More

Investor Banned From Offering Property For Rent

Do you realize that you might be prevented from renting... Read More

Minneapolis Warehouse Loft

Downtown Minneapolis is rich with true metropolitan charm. With the... Read More

Real Estate Investing in Rentals ? the $10 Million Real Estate Investing Mistake

Renting to tenants is no longer "where the money is"... Read More

Rapid City Real Estate Agents

Take me Back to the Black HillsLocated in Western South... Read More

Investing In Commercial Property

Why commercial property?Compared to residential property investments, commercial property offers... Read More

First Impressions Will Sell Property Fast!

First impressions count, buyers will have already formed an impression... Read More

Buying Beach Houses in New Zealand: Real Estate and Investment Opportunities

Buying a beach house in New Zealand offers many possibilities.New... Read More

Land Subdivision - $1.2 Billion Dollar Developer Tells You How To Do It

Land subdivision is a bit like helping Mom slice up... Read More

Foreclosure Home Deals

Did you know that you can save tens of thousands... Read More

Easing Your Way Into Homeownership: A Guide To Low Down Payment Mortgage Programs

There's no question about it: Buying a first home is... Read More

Conventional Financing For Wholesale Deals

This info is very important for both new and experienced... Read More

Buying Outer Banks (OBX) Investment Property

So, you're thinking of purchasing a rental property... Read More

Appraisal vs. Market Value: How to Avoid Pitfalls in the Sale of Your Home

When you sell your home, appraisers use comps (comparable market... Read More

Miami Property Booming for Foreign Investors

Miami tourism is growing and so is the Miami property... Read More

Dealing With Difficult Tenants

When managing residential properties one bad tenant can often undo... Read More

Home Equity ? Don?t Spend It on Risky Investments

The housing market has exploded in the last five years,... Read More

Helpful Hints for First-Time Home Buyers

Buying a house can be a daunting task, even for... Read More

New or Old House?

A lot of buyers think that a new house is... Read More

Real Estate Bubble: Sophisticated Musical Chairs?

The real estate bubble is a hot topic today; annual... Read More

Building Your Dream Home - Part 1

For most of my adult life I had thought about... Read More

How To Go About Selling Your Home On Your Own

In days of booming real estate, you would think that... Read More

Moldy Homes are a Great Investment

Have you seen this in your classifieds? -"Will pay $$$... Read More

How Long Your Mortgage Runs Determines How Much You Pay

The first thing most of us think about when the... Read More

How to Build a Real Estate Investing Power Team

As you continue to read about real estate investing, you... Read More

Achieving Positive Cash Flow from Your Real Estate Investments

Even if you're counting on rising property values to eventually... Read More

Tenant/Buyers Have Multiple Options

Lease Purchasing affords the tenant/buyer a wonderful opportunity to get... Read More

Cashing Out of Preforeclosures - Exit Strategies for Maximum Profit

One of the quickest ways to real estate profits is... Read More