Cohousing-L Mailing List: Re: Guiding principles for dealing with leftover contingency funds

[Sharon Villines (sharon]

On 23/10/2002 3:03 AM, "S. Kashdan" <skashdan [at] scn.org> wrote:

> We are also trying to decide what to do with money we might collect for
> projects, if we give refunds to everyone and then ask for as much as
> possible of that money to come back for projects.  Some folks are worrying
> that funneling it through either the LLC or the Homeowners Association might
> be fraught with tax implications.  Although it wouldn't actually be a
> monetary gain to the LLC or the Homeowners Association, we are thinking we
> might need to do something like create a special projects club.  etc. We
> will be consulting a lawyer about our legal options.

After we moved in, funds that had been paid for services or equipment that
people did not receive, were refunded to them. These were for various items
that were budgeted but turned out to be not feasible. No consideration was
made for keeping the funds because the amounts and items were different for
each floor plan or building placement.

There was money in the members fund that was rolled over to our reserves
fund. I'm not a lawyer but as along as you indicate where these funds came
from, that wouldn't seem to be a problem.

The larger issue is how you budget for the future. Unless you are talking
about tens of  thousands of dollars per unit, you will need to start two
funds above operating expenses and capital improvements -- a contingency
fund, usually 10% of the operating budget, and a reserves fund for
replacement and repair of current common elements. There are companies who
do reserve studies to determine how long various elements will last before
replacements are needed, how much they will cost to replace in the future,
and how much you can expect to earn in interest on your deposits. From this
you can set a yearly amount for each homeowner.

Being able to stock these funds with money already collected then reduces
monthly or yearly payments.

Capital improvements are much more complex because some homeowners will have
been functioning under the "implied or explicit" promise of certain
amenities when they bought property. These promises may be legally or
morally binding. The group as a whole will have to determine the status of
these and reach an agreement on how to proceed.

Sharon
-- 
Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org

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