Homeowners and Condominium Owner’s Association, HOA, and COA, respectively, are organizations in charge of maintaining and managing commonly shared areas in planned housing developments. The basic difference between a COA and an HOA is in the operational mechanism and the type of planned development. Here, we talk about the importance of reserve funds in these organizations and discuss how to manage HOA and COA reserve funds.
Before we talk about reserve funds management, let us first distinguish between the two organizations. Even though the terms are used interchangeably, they are quite different.
What is a Condominium Association?
A condo is basically one larger real estate divided into smaller, separately owned units. Condominiums have shared spaces such as a common elevator area, outdoor areas such as yards, and parking areas, etc.
A condominium association acts through its board under its governing documents and Florida law. A community association manager may assist with administration. Review the applicable rules to understand the board’s responsibilities and unit owners’ rights.
What is a Homeowner’s Association?
A homeowner’s association is similar to a COA. However, where COA is for multifamily residential properties, an HOA is also for single-family residential communities. The organization’s main goal is to ensure the maintenance of residential properties and to ensure a cohesive environment.
HOA-managed residential developments have a board of directors, and members are all owners of the residential properties. Most HOA’s do have managers with different responsibilities. Thus, an increasing number of owners have a chance to become part of the decision-making process.
HOA and COA Reserve Funds and their Management
Association assessments support the responsibilities set out in the governing documents and applicable law. The operating budget covers recurring costs; reserve accounts address planned major repairs, replacements and deferred maintenance. Condominium and homeowners associations have different reserve requirements.
Review the association’s adopted budget, reserve balances and funding plan. These records help owners understand which future projects are funded and whether additional contributions may be needed.
Here is how you can manage your funds better.
- Calculate Your Regular Expenses – Identify your recurring expenses and separate them from those you are only likely to incur once in a while.
- Separate Operating Costs from Reserves – Budget recurring expenses separately. Reserve accounts support major repairs, replacements and deferred maintenance. Use reserve funds only as permitted by applicable law, governing documents and required approvals.
- Plan Reserve Funding – Review the remaining useful life and estimated repair or replacement cost of reserve components. For condominium associations subject to structural integrity reserve study requirements, use the applicable study and current legal requirements to inform funding decisions.
Consult the association’s community association manager, accountant and legal counsel about reserve requirements and permitted uses. Novel Management manages individually owned rental properties; it does not provide HOA or condominium-association management.
Official reserve guidance: Florida condominium reserve requirements; Florida HOA reserve requirements; DBPR structural integrity reserve studies.
