COLUMN: Barbara Holland

Q. About two years ago, we were assessed to paint our houses and now we're being assessed for landscaping work. Are they not supposed to use up the reserve fund first before assessing us?

We have had several raises in our dues, two of these were just to make the reserve larger, so there should be funding to take care of this landscape work. Is there a minimum amount of money that needs to be maintained in the reserve account? How many reserve accounts should there be?

A. State law requires that the reserve be properly funded according to a reserve study. A study must be prepared once every five years and reviewed every year by the board of directors before it develops the annual operating and capital improvements budget.

As a homeowner, you have a right to obtain a copy of the reserve study along with financial information as to the number of reserve accounts and their balances. The association may charge you a fee for copying the information for you.

Before changes in the state law, many associations had very limited funds in their reserves. It is quite possible that your association needed to play "catch-up," and that accounts for the two increases in your dues.

Your finances may be such that on top of these increases, it was necessary for the two special assessments, as the money in the reserves could have been drained and the association had to restore its reserve accounts to the amount suggested by the last study. You can only know for sure by reviewing the reserve study and comparing it to the balance in the reserve accounts.

As for the number of accounts, there is no law that requires a certain set of accounts. Many associations layer their reserve accounts with some for short-term needs (such as painting the fence around the pool) and some for long-term needs (such as replacing the roofs).

In layered accounts, the association would not receive the same interest for funds that would be used within a year or two versus those that may not be spent for longer periods of time, such as five years.

Other associations will have multiple accounts because the maximum amount of insured bank funds by the federal government is $100,000.

Questions for Barbara Holland may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759.

Barbara Holland, Certified Property Manager, is president and co-owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management and is the author of two books on the subject. Holland is a past president of the Greater Las Vegas Association of Realtors.

Real Estate home