COVID-19 has brought economic hardships to individuals and businesses across the world. Community associations are no exception. For example, there are increased cleaning and maintenance protocols, and higher expenses along with it. At the same time, dues collection can be challenging. Owners cringe at special assessments. Communities may be looking at reserve funds to cover some of these expenses.

Reserve funds are typically set up to prepare for future expenses. However, with hardships occurring now, and assessments difficult to implement, HOAs may be looking at these funds to address budget gaps.

Borrowing from reserve funds may help communities avoid a special assessment, deferring a further burden on homeowners that may be struggling. Reserve funds are still collected from homeowners, but typically in a smaller amount spread over time as part of their dues. Borrowing reserve funds is often quicker than issuing a special assessment.

However, borrowing from reserve funds should be done with caution. These reserve funds are planned by boards and management for repairs, replacement and maintenance of community areas like pools, sidewalks, and roofs, and this work will still need to be done in the future. Before dipping into reserve funds, evaluate what replacement and repairs are planned in the near term, and make sure there are funds for those projects.

It is critical to get professional advice before making a decision about how to implement these reserve funds. Boards should make sure their actions are allowed according to the HOA bylaws and organizing documents.

Using reserve funds to address budget gaps may not be ideal, but many communities might not have a choice as COVID-19 creates new and essential expenses.