Blog Posting by David C. Swedelson, Senior Partner, SwedelsonGottlieb.
I just read an excellent article by Robert M. Nordlund, P.E., R.S.
with Association Reserves, Inc. that addresses the issue of how much California condominium associations should be reserving. He starts out with the proposition that “[t]ypically (that is a dangerous word), most condominium associations should be setting aside 15% – 40% of their assessments towards Reserves. This ratio is lower for associations where each homeowner maintains their own home and the association is only responsible for some minimal common areas. Obviously, every association has its own unique list of common area assets it is responsible to maintain. Some may have a longer list that force higher Reserve contributions (pool, elevator, tennis court, balconies, wood siding, etc.), some may have shorter lists of amenities or more cost-efficient exterior finishes.”
Nordlund does go on to say that in addition to these physical factors, there are three other important influences to your reserve contributions: 1. Economic assumptions for interest and inflation; 2. Your current “starting point”, measured in terms of “Percent Funded”; and 3.Your Objective, full funding or baseline funding?
