Proper Use of Condo Reserve Funds

Question: Are there state statutes that prohibit the board from using reserves to fund an operating account deficit?

Answer: State laws vary on this topic. Most are silent altogether. The governing documents may or may not have something to say about it. But it usually comes down to common sense. If the HOA has a real reserve fund, only reserve related expenses should be paid for from reserves.

If the HOA runs an operating budget deficit, the board should raise a special assessment to fund the deficit, not rob from reserves. If the reason for the deficit is likely to recur, subsequent year operating budgets need to be increased so it doesn’t happen again.

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