Cohousing-L Mailing List: reserves.....even worse than a fine:

[Christine Johnson (manzjohnson]

Rob Sandelin wrote:  "In some states assessment reserves are mandated  
by state law and if you don not do so you are liable for fines.  So  
if you decline to create these, be
sure to know your state law so you don't end up stuck with a fine."

The consequences of not funding or underfunding a reserve account are  
potentially even worse than a fine:
1.  deferring maintenance due to lack of reserves resulting in major  
repairs that can only be funded through a special assessment
2. or neglecting needed maintenance to the point at which at which  
owners cannot sell because the buyers inspectors disclose on offer,  
deficiencies and then it goes downhill from there to
3.  lenders declining loan apps in an HOA/COA which has insufficient  
reserves
4.  buyer's agents advising potential buyers to not offer on a home  
in an HOA/COA which cannot show sufficient reserves on account
5.  those owners who cannot attract a good offer, discounting the  
price and accepting a low offer from an investor whose interests are  
short term(i.e.,  resist assessment increases a
        and will every time, vote against a special assessment)
7.  bad vibes in general directed towards the leadership that  
declined to require appropriate reserve funding or worse
8.  litigation against those who did not fulfill their fiduciary duty  
as 'board members' to properly fund reserves

I'm really not exaggerating.  All of this has happened and is  
increasingly common with the present economic downturn.  The people  
who bought into an HOA/COA optimistic that 'someone' would take care  
of the maintenance and such, now find themselves in a declining  
market in aging and declining properties.   Those who fund reserves  
appropriately at the outset will weather the downturn in far better  
spirits and certainly have fewer maintenance headaches.