New Law Tackles HOA Reserves and Disclosures
By Evelyn Dufford, CMCA, PCAM
This spring the legislature passed and the Governor signed into law HB1309 . The law is an update for reserve funding disclosures for condominium and adds the concept of reserve funds for homeowners associations with “significant assets”. The bill becomes effective 1/1/2012. Let’s tackle the disclosures first. For both the condominium and the homeowners associations, this bill has about 18 to 20 disclosure points that need to be a part of the budget process. They are basically the common sense things like what does the Reserve Study say we should be putting away, how much are we putting away and is it enough to meet our obligations to take care of the common area assets. The legislation then goes on asking the Boards to be prognosticators and predict future special assessments. I can imagine an interesting conversation with a Board of Directors about these predictions. The other significant piece of this law is the folding in of the Homeowners Associations into the requirement for Reserve Studies and Reserve Funding. There are many new definitions that Homeowners Associations will have to be aware of and apply to their situation. Per usual, there are caveats for small associations and those whose assessment won’t cover the cost of a reserve study. Much of it is similar to the condominium law that is already on the books with a 30 year time-line for components for maintenance, repair and replacement of major association assets. The thought is that this bill was for the big associations with thousands of homes and multiple recreation areas. My concern is for small Association with private roads. We have several that have 15 to 20 homes, a private road and a park. All of these are being affected by the reserve law. So what to do now? Well, first off, plan your budget to start complying with the new law. Get a reserve study bid and build it into the budget for 2012. Then in 2012 you can create a budget with reserves. As you do your budget process this year, start some of the disclosures. One of the disclosures is a simple breakdown of the assessment that is being proposed and what part of the current assessment is dedicated to the reserve fund? These two pieces will start you well on your way. As a reminder, we are holding our Budget Seminar on September 13th, 2011 at 7:00pm. Be sure to sign up at www.AssociationServicesWA.com. We be talking about the new law and much more
