Each year, one of the most difficult choices faced by a HOA board in Santa Clarita is whether they should increase assessments in order to fund their reserve account, or to keep the assessments low, and delay the funding of the reserve account for another time (if at all). There are a number of different reasons that a board may make the decision to under fund their reserve accounts. In fact, the decision may be based on the fact that the association is having a difficult time collecting the assessments and the money that is being collected has to go to meeting the operational expenses; however, there may be misguided reasons that the board has the desire to keep the assessments low due to a fear that the HOA members will not provide support for an increase to fund the reserve accounts.
There is no question that raising assessments, even when it is being done in order to increase the reserve accounts, is not a popular decision. Instead, they find it much simpler to keep the assessments low. The board makes the decision that the low assessments will help to keep the members happy, at least for the near future.
When it comes down to it, however, failure to keep the reserve account properly funded can be a huge mistake. There are too many associations that rely on the statement in California that states that HOA’s are not legally required to providing funding to reserve accounts, this can be extremely dangerous conclusion and can impact the financial health of the entire home owners association. No matter the cause for not providing funding to the reserve accounts can put the entire financial health of the association at risk. This is so important that recently, the California Department of Real Estate has issued a consumer warning regarding the dangers of an underfunded reserve account for homeowners associations.
If reserve accounts are not properly funded, then it can result in an increased risk that special assessments will have to be made in order to pay for necessary or emergency repairs. Additionally, an underfunded reserve may lead to lower property values in the homeowners association as the buyers will become wary of the properties that are going to be assessed these special assessments. Also, if the reserve funds are not properly maintained, they will make the houses in the community ineligible for any type of federal loan that is issued by Fannie Mae or Freddie Mac, thereby reducing the market of potential buyers, which will have a further impact on the property values.
If you are a member of an HOA in Santa Clarita, it is essential that you ensure that the reserve account is properly funded at all times. This will protect you from future special assessments, as well as the potential decrease of your property value. When you are a member of an HOA it is essential to play your part and pay the appropriate fees in order to keep the HOA functioning properly for all community members.
To learn more about why it is important to make sure that the reserve account is properly funded, or about hiring a technologically advanced property management company for your Santa Clarita property management needs, contact National Property Management Group.
National Property Management Group
28009 Smyth Drive
Valencia, CA 91355