Capital Improvements & Annual Corp Filing
Leaks are happening into homes b/c of the failing stucco and the last time we had our buildings painted was summer 2011. I don’t know a ton about reserve studies and capital improvements or other expected routine maintenance projects in terms of best practices. Do you have a general summary of how this works best? Is the general idea to have enough assessment income set aside in reserves for those types of known, routing improvements/projects, rather than taking out loan after loan?
When the new board is elected, at election night, isn’t that the date they officially take office and isn’t that the date on the annual corp filing? Does it matter if the corporation commission filing has incorrect dates?
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PJ
This is a good question. Many people don’t fully understand the rights and obligations of association board to prepare for the long term maintenance of the common property. While most associations have reserve funds and are authorized to include adding money into those accounts for future needs in the annual budget. But how much they put into those accounts is not simply a guess or based on what the board believes they can raise without too many complaints. Or at least should not be. Long range maintenance plans should be based first on identifying exactly what the long term maintenance needs of the community are then figuring when those maintenance projects will be needed. From that current cost estimates can be obtained on what it would cost to do that project today and estimating from that how much it will cost when in the year it is scheduled. Once all those projections can then be compiled in a plan to ensure that sufficient money is available in any future year to fund the projects scheduled to be accomplished in that year. This is called just in time funding. With this information you can calculate the exact amount of money that has to be put aside every year to be able to fund all those projects.
This may sound complicated and it can truly be with large communities but it is a fiscal duty of the association to accomplish. Even if the board has done a good job the hardest part of all of this is the discipline of the board to actually keep these funds available to only fund the projects planned for. Far too many associations use their reserves as a slush fund for failure to adequately plan for actual annual budgets expenses. What happens then is the reserves are depleted and when the long term maintenance is needed there are insufficient funds available to do the project. The association then gets to charge you again for the same maintenance project via a special assessment.
While all homeowners have an unconditional obligation to pay for the maintenance of the common property you also have a right to hold your board accountable to reasonable and prudent planning and use of the funds they use to accomplish that task.
As for the issue of officer reporting to the Arizona Corporations commission. The association is required to provide an annual report to the ACC based on the original incorporation date. Technically when new board members are elected the commission should be informed but to the best of my knowledge their obligation is only to the annual report irrespective of when the elections actually occurs.
Dennis