When Condo Association Reserves Are Insufficient To Cover Emergencies
There are certainly some advantages to living in a condominium as opposed to a private, single-family home. In most cases, individuals who live in condos do not have to concern themselves with yard maintenance or other types of outside maintenance related to the condo unit. This is because most condo owners pay homeowner's association fees that cover such maintenance throughout the community. A specific portion of the fees might be set aside for ongoing landscaping, while a separate portion may be allocated to certain one-time expenses, such as exterior painting. Still, some condo owners often have questions or concerns about what will happen if a repair is needed or an emergency situation arises for which the association's reserve funds are insufficient to cover.
For instance, the northern states, particularly New Jersey and New York, have seen their fair share of rough weather throughout the years. That being the case, many buildings and communities have experienced extraordinary damage that may not have been contemplated by the community association. Such incidents can be devastating for condo owners whose associations are not fiscally sound enough to survive certain emergencies or in cases where the associations' insurance policies do not cover the damages incurred.
If a community does incur a large emergency expense for which there is not enough money in the reserves, the condo owners may be asked to pay what is commonly referred to as a "special assessment." But there are ways to avoid having to dig deeper into one's personal pockets for even more money for such issues. One way is by doing a reserve study every few years, whereby experts will actually visit the property and make determinations with respect to how much money should be sitting in the reserve fund for future capital replacements or improvements.
It is not uncommon for associations that are financially solvent to have both operating budgets that cover certain day-to-day costs, as well as reserve funds that are established to pay for capital improvement projects and large repairs. Even still, it is impossible for associations to plan for every possible incident that might take place. That said, in New Jersey, some communities have established "replacement" reserve funds. Such funds will call for owners to pay out more money initially; however, it may be better to do so ahead of time, as opposed to forcing special assessments on the owners.
If you have any questions or concerns about the sufficiency of your condo reserves, contact an attorney at Griffin Alexander, P.C. today.