Understanding Reserve Funds: A Board Member’s Guide
Many boards know they have a reserve fund, but few know how much should be in it, when to use it, or how to plan around it. Whether you are managing a co-op or HOA, a healthy reserve fund is one of the most important tools you have to protect your building and its future.
In this week’s Property Insights post, we explain what a reserve fund is, how it is different from operating expenses, and what every board member should know to ensure long-term financial stability.
What Reserve Funds Are (and Are Not)
A reserve fund is money set aside for major repairs and replacements. It is not intended for daily operating costs like utilities or payroll. Instead, it acts as a financial safety net for big projects that inevitably come with building ownership.
How Much Should Boards Contribute
There is no one-size-fits-all number, but boards should make annual contributions based on projected capital needs. The goal is to maintain enough reserves so that major projects do not require emergency assessments or large loans.
When to Use Reserve Funds
Reserve funds are appropriate for long-term capital projects such as roof replacements, boiler upgrades, or major facade repairs. They should not be used to patch shortfalls in the annual operating budget.
The Risks of Skipping Contributions
When boards fail to fund reserves, they put the community at risk of sudden assessments, deferred maintenance, or legal trouble. A weak reserve position also reduces property values and can complicate financing for owners.
Why Jonasvar Builds Reserve Forecasting into Every Plan
At Jonasvar, we make sure reserves are forecasted as part of every annual financial review. This helps boards plan ahead, minimize surprises, and keep their communities financially stable.
Let Us Help
Jonasvar helps boards stay prepared, not panicked. With transparent budgeting support and reserve planning, we make sure your board has what it needs today and tomorrow.
Ready to review your board’s financial planning?