Reserve funds should be accumulated following the important information in the reserve study and cannot be used for anything other than replacing, repairing, or refurbishing the specified deteriorating capital components. Civil Code Section 55510(b) bars boards from spending reserve fund money except for repairing, replacing, restoring, or maintaining the components regarding which the money was saved. Withdrawing money from the reserve fund account for any other purpose is considered “borrowing” from the reserve fund. One common requirement is that the HOA have a certain amount of money in its reserve account, and another is that the HOA not have too many delinquencies. A healthy reserve fund cannot only make it more likely that the HOA would qualify for a loan but can itself be a short-term borrowing source.

Source: thestar July 01, 2023 21:56 UTC