Maintaining Reserve Funds
QUESTION: The condo Board has raised the condo fees 51% in the last 5 years. From one week to the other one they decided to increase from 5% to 10% for 2008 stating that the state of Virginia has a new law saying that the reserves needs to meet "x" amount. Is that true? Is there anything we the neighbors can do to stop the Board from raising the fees that much? Thank you very much! RESPONSE: The Virginia Condominium Act (Sec. 55-79.83:1) requires 3 things that each association must do with regards to reserves: 1. Conduct a reserve study at least once every five years. 2. Review that reserve study at least once every year. 3. Make any adjustments necessary, as determined by the Board.
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Reserve Studies
Q. I am the President of a 6-unit condominium and recently one of our owners said we are required to do a Reserve Study. Does VA law require the board to conduct a reserve study or just to have a reserve? If yes, how often? We are a small association with minimal maintenance and common property. We'd rather handle this ourselves but we obviously also want to follow the law.
A. Thank you for bringing up this topic – it is quite timely as you will see. Further, even though you are a small condominium association, the Association is probably responsible for replacing almost all components of the building(s) which are of significant value to the owner, so your reserves are as important as any larger association.
Both the Condominium Act (§55-79.39 et seq.) and the Property Owners’ Association Act (§55-514.1 et seq.) require that Associations conduct a reserve study at least every five (5) years to determine the necessity and amount of reserves required to repair, replace and restore the capital components; review the results of that study at least annually to determine if reserves are sufficient; make any adjustments the board of directors deems necessary to maintain reserves, as appropriate; and provide a copy or summary of the reserve study report to prospective purchasers. Since these provisions went into effect on July 1, 2002, the last possible date that an association can do the study and be in compliance with the law is July 1, 2007.
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