Unlocking Reserve Studies: Understanding Reserve Fund Guidelines under the Davis-Stirling Act
There are strict guidelines regarding the usage of Reserve Studies under the Davis-Stirling Act. The Davis-Stirling Act requires homeowners associations (HOAs) to create and distribute a reserve funding disclosure summary to each member annually, which is included in the annual budget. This requirement not only helps guarantee that HOAs adequately fund their reserve accounts but also dictates how reserve monies may be used.
Ensuring Financial Stability: The Role of Well-Managed HOAs
When the time comes, a well-managed HOA will put away enough money annually to make sure it can pay for any significant maintenance and replacements of its essential parts. By doing this, the HOA’s financial integrity and stability are preserved, ensuring members are not saddled with unforeseen expenses or liabilities.
Strategic Funding: Experts Recommend 70% Funding in Reserve
Although no minimum amount has to be put into HOA reserve accounts, most experts agree that a financially sound HOA has at least 70% of its funding in reserve. That proportion can, therefore, be used as a quick and easy tool for homeowners or potential buyers to assess the overall financial health of their HOAs.
Compliance and Vigilance: Board Responsibilities under the Davis-Stirling Act
Board members and association management should take the necessary actions to comply with the act’s provisions and be aware of its requirements. Failing to do so may expose the association and its members to legal liability and have a negative financial impact on the HOA as a whole.
Ask an Estate Planning Attorney Today
For more in-depth insights into navigating Reserve Studies and understanding the Davis-Stirling Act, consult with our knowledgeable team at Hudack Law. Discover strategic solutions tailored to ensure your HOA’s financial stability. Visit Hudack Law Estate Planning Attorney for comprehensive information on our areas of service. Serving California and Arizona, we stand ready to assist you. Contact our California line at (877) 314-4309 or our Arizona line at (602) 777-7882.