Save Your Condominium Association Money

Posted by Krista K on

Save Your Condominium Association Money

Your  Homeowner or Condominium Association depends upon the timely receipt of your monthly assessments from the homeowners in order to meet its financial obligations. When the Board approves your community’s budget, it assumes two things: the amount of income must equal the amount of expenses, and, that each homeowner will pay his or her maintenance assessment in a timely manner. If one or the other fails to happen, it then leads to a cash flow problem, which usually results in costing everyone more money in the long run.

Your Homeowners or Condominium Association depends entirely upon the monthly assessments to pay its bills (insurance, landscapers, water, electricity, gas, management, etc.). Every time homeowners are delinquent in paying their assessments it creates a “cash flow shortage” that may prevent the  Homeowners or Condominium Association from paying its bills on time. There is no other source of income available to make up for the shortage. If the Homeowners or Condominium Association “borrows” money from the capital reserves to pay for operating expenses, it is still required to pay it back, which in turn creates even more expenses.

Even when a few homeowners fail to pay their assessments on time it ends up costing all of the residents more money. That is because since most of your community’s expenses are predetermined, the only way to make up for a cash flow problem is to increase the amount of money coming in, or raise your monthly assessment amount. Everyone can take part in keeping their Community’s expenses down, and one of the best ways is to make sure that your monthly assessment check is sent on time!

PENCO Management has the expertise to deal with various issues that your Homeowners or Condominium Association may encounter on a daily basis. Our company provides Property Management services to New Castle, Chester, Delaware, Montgomery, Berks, Bucks, and Lancaster Counties.

Reserve Fund

Reserve Fund – Why Does Your Community Need One?

Posted by Krista K on

Reserve Fund – Why Does Your Community Need One?

Many homeowners continue to ask the question why does their Community need a reserve fund?

Major components such as a pool, playground equipment, roofs, or siding must be replaced from time to time, regardless of whether or not the Community Association plans for the expense. It is in the Community Association’s best interest to set aside the reserve fund account now. Money contributed to the reserve fund is not an additional expense—it simply spreads out the expenses more evenly. There are other important reasons that Association monies should be put into a reserve fund every month:

Having a reserve fund will meet legal, fiduciary, and professional requirements. A replacement reserve fund may be required by:

• Any secondary mortgage market in which the Association participates
• State statutes, regulations, or court decisions
• The Community’s governing documents

An adequate reserve fund will provide for major repairs and replacements that  will be necessary at some point in time. Although a roof may be replaced when it is 25 years old, every owner who lives under or around it should share in its replacement costs.

Incorporating a reserve fund into your Community will minimize the need for a special assessment or loan for capital improvement projects. For most Association members, this is the most important reason.

It should also be noted that the American Institute of Certified Public Accountants (AICPA) requires the Community Association to disclose its reserve fund balance in its financial statements.

Enhanced resale values are just one of the added bonuses for Communities which have a healthy reserve fund balance. Lenders and real estate agents are aware of the ramifications for new buyers if the reserves are inadequate. Many states require Associations to disclose the amounts in their reserve fund to prospective purchasers.

PENCO Management can assist your Association with managing your current replacement reserves to help ensure that these funds are accessible as needed. Our company services New Castle, Chester, Delaware, Montgomery, Berks, Bucks, and Lancaster Counties and has the property management experience needed to successfully maintain your Community for years to come.