Who needs reserves?

If there is one thing people hate almost as much as an assessment increase, it is properly funding reserves.  Some owners look at those lonely accounts, chock full of unused cash just sitting there, and think, "Hey, let's use that money now! That way, we don't have to raise assessments this year!"  Other owners look at the reserves and wonder if perhaps it's okay to defer reserve contributions until a time when finances loosen up.

Hogwash. 

The fact is, if your association has maintenance obligations, you really can't have a robust enough reserve fund.  Even a good reserve study can miss expensive maintenance obligations, such as subflooring, crawlspaces, and built-in chimneys.  This is especially problematic if your governing documents are at all ambiguous. 

If your association reserves for the expected life of a product that fails significantly sooner, a strong reserve account can help prevent special assessments.  Special assessments can be catastrophic for a community, resulting in lending problems and foreclosures.

Many owners will run for the board on a platform of "No assessment increases," and a lot of board members are proud if they never increase assessments.  However, a refusal to increase assessments when necessary to keep up with inflation and reserve obligations can be seen as a failure to fulfill duties to the association.  By no means am I arguing that associations should increase assessments willy nilly, or ignore the impact that increased assessments can have on owners, but operating a business costs money and if a board member wants to be protected by the business judgment rule, that board member needs to look at budgeting from a business perspective.  Don't skimp on reserves.