August 3, 2017 Jennifer Norton, CCAM, CMCA Manager Musings
Buying into an Association means you are now a member of a nonprofit corporation/association that was created to manage a common interest development. In simple terms, you share ownership of where you live!
Each member/homeowner is responsible to pay a specified amount each month into the operating and reserve funds of the Association to ensure the financial responsibilities of the community are being met.
The original budget is created by a Management Company that specializes in creating BRE (Bureau of Real Estate) budgets, such as Crummack Huseby. These budgets are created on a specific form that utilizes pre-determined costs for each line item, multiplied by the number of that specific component or square footage that correlates to your community. Once these costs are determined, they are divided by the number of units in the community through that phase. Each new phase has its own budget and once a new phase has a close of escrow, the entire community is now on the new budget and subject to that assessment rate. Hopefully I still have you with me on this budget journey! Once a community is fully built, we typically wait about 9-12 months operating on the last phase budget to see what the actual costs are for maintaining a healthy Association. A new budget is then created by Management and presented to the Board of Directors for discussion and approval. The new budget will take effect on the first day of the new fiscal year which is typically January 1st though some associations may have a different fiscal year end.
The operating account is used for the daily maintenance items such as landscaping, janitorial services, pools, handyman work, lighting, pest control, Management, utilities and other vendors that may service your Association monthly. The reserve account is used for the repair, restoration, maintenance or replacement of major components for which the Association is responsible. A few examples of reserves would be for resurfacing the streets, painting the buildings or re-plastering a pool depending on what the governing documents require the HOA to maintain.
Paying assessments is part of a member’s fiduciary obligation to the community. This is just a brief snapshot of what your assessments are for but I would be happy to discuss this more in-depth if you have any questions.
As always, I am here to help answer any questions for you.
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MANAGER MUSINGS is written by Jennifer Norton, CCAM, CMCA, a Senior Community Manager at Crummack Huseby. She has been a community manager for almost eight years with experience in new community development, existing Associations and community relations management. Our goal is being insightful, in person and invaluable to our homeowners and to partner with them for the betterment of their community.