A Reserve Study lays out a plan that is fair to all members along the 30 year time line. By dividing up the costs into 360 monthly payments (as in the case of condominiums and other common wall communities), each member pays only the part of that 360 months applicable to their ownership in the HOA. If all members are paying monthly, no member will get stuck paying for someone that didn't. That is what a special assessment is: You just got nailed because those that bought and sold skated on paying their share of these costs.
But your HOA is different, right? Even if these costs have been handled by special assessments in the past, your board won't continue this clearly unfair method...right? Sadly, many boards keep trudging the same path because "that's the way it's always been done". Progressive states have realized that special assessment funding is irresponsible and have enacted reserve funding requirements for their HOAs. In those states that haven't, it's incumbent on the board to plan for these events without being told to. It is simply the right thing to do and to do otherwise is negligent.
Adopting a Reserve Planning philosophy is what the business gurus call a "paradigm shift". There is often significant resistance to change from certain HOA members who view it as an added cost. These folks like to live on the edge and often have more month left over than money. For them, problems aren't problems until they are long overdue.
While individuals have the right to live on the edge for personal finances, this does not work in a homeowner association where the finances are inextricably linked. Reserve Planning recognizes this phenomena and charts a course where all participants play their part.
While a Reserve Study charts the course, it doesn't establish the policy. A plan without a policy is like a ship without a rudder. It may sail straight for a while but then change course because a new captain is at the helm. A Reserve Policy holds future boards to the original course. It identifies what will be included in the Reserve Plan, how it be funded and restrain future boards from unilaterally deciding not to follow it.
Since boards can and do change frequently, having a clear philosophy on reserving is critical. It will help stop the all too common boom and bust cycle of one Board putting money away and the next one spending it.
If your homeowner association has not had a professional Reserve Study performed, do yourself a favor and do it. Having large numbers of units/homes is not the determining factor. Curiously, the smaller the HOA, the more critical a Reserve Study is because the cost per owner goes up. So, get it done and adopt a Reserve Plan & Funding Policy so this paradigm becomes reality.
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