Seven Ways to Avoid Special Assessments
Relying on special assessments is never a good plan. They place an unnecessary burden on owners and are unfair to some owners. Following are seven ways to avoid special assessments:
- Obtain a reserve study from an experienced reserve study provider every three years as required by California law and update it every year in between.
- Fund your reserves so that you achieve a 70% minimum percent funded calculation.
- Make certain that your reserve study calculation produce a positive cash flow for 30 years including a contingency factor of at least 5%.
- Make certain that all replacement costs in your reserve study include a contingency factor of at least 5%.
- When preparing the association's annual budget, make certain to include a reasonable allowance for bad debts.
- Keep at least one month of normal operating expenses (cash) available for unforeseen expenses.
- Establish a realistic operating budget each year and modify it if necessary.
American HOA Management