QVHA Reserve Analysis
How Important are Reserve Funds?
Reserve Funds are essential to a financially sound homeowners association. They are held in an account with a specified purpose and cannot be accessed for normal costs of operation. The Reserve directly impacts your home value and your ability to sell your property.
PURPOSE OF RESERVE
Funds in the Reserve are set aside for commonly held components in the development (infrastructure, roads, buildings, recreation facilities, etc.) that have a lifespan of 3-30 years. The Reserve Analysis identifies the amount it will take to replace, repair or restore them. In the annual budget there will always be a line item for the Reserve, meaning that part of your monthly dues go into this fund. Money set aside in the Reserve Fund cannot be used for anything other than those items specifically identified and described in the Utah State Code. The law requires that funds be separate from other Association funds (Utah State Code 57-8a-211 (9)(b)).
Homeowners Associations are required by Utah State Code to do a Reserve Analysis at least every six years. They are also required to review and update the information every three years. Our most recent reserve study occurred in 2010.
ANNUAL SUMMARY AND UPDATES
The Association is required to provide a summary of the most recent Reserve Analysis annually. They must also provide a copy on demand whenever requested.
RISK OF INADEQUATE RESERVE
An inadequately funded Reserve will reduce the value of your property. A well informed buyer knows that without adequate funding, a homeowner may be hit with a massive special assessment to take care of a neglected infrastructure problem.
If a property is reduced in value due to a inadequate Reserve, the owner may sue for damages after the sale is completed recovering any concession they had to make in the home price due to the insufficient reserve, as well as lawyer's fees and court costs. Utah State Code 57-8a-211
GET YOUR OWN COPY
If you want a copy of the Reserve Analysis from QVHA (many realtors and prospective buyers will request it), contact Rich Wells by email. This is the most recent Reserve Analysis provided by Rich Wells. It was prepared in March 2010. This study reported that "the Association's percent funded is 015.4%, which is considered poor. Generally, any funding level at less than 30% is considered weak."
Current funding of the Common Reserve as of March 31, 2016 is about $22,000 which continues to be at a level considered "poor." The new Reserve Study (dated Oct 31, 2015) is now available through Rich Wells.
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