Even Small Association Boards Are Required to Have Reserve Studies

QUESTION: In your Oct. 25 column item headlined “Lack of Reserves Is Bad Idea,” you said a community association must have a reserve study that is distributed to all owners.

The board of our homeowner association voted to have a reserve study prepared several months ago, but our accountant said we didn’t need one because we have only 16 units in our building.

Does state law require the reserve study? Are small associations like ours legally required to have reserve studies?

ANSWER: Yes, state law requires that all associations, incorporated or unincorporated, have reserve studies prepared every three years. Your small number of units does not exempt your association from the requirements of California Civil Code 1365.5 (e). If your accountant is not aware of this law, he or she can find it in the legal reference section of your local library.

In a small association, the owners are especially vulnerable if there is no reserve fund.

The first step is the preparation of a reserve study. The board should review the reserve study each year, consider the items that were repaired or replaced during the fiscal year, determine what items need repair or replacement during the next fiscal year, and use that information in preparing the reserve budget.

Complex Should Not Alter the Design of Its Wrought-Iron Fence

Q: Our condominium complex, built in 1973, consists of more than 200 units. There is a 6-foot wrought-iron fence with brick columns around the perimeter and two electric gates for vehicles.

The fence needs to be replaced. Since replacement would cost $15,000, the board wants to remove the perimeter fence and install smaller fences at the gaps between the buildings. This would leave the front units exposed to vandalism.

Some of the owners feel that the board does not have the authority to change the architectural design of the complex. The declaration of covenants, conditions and restrictions states, “The board shall have the duty and power to maintain and otherwise manage all of the common areas and all of its facilities.”

Does the board have the authority to change the fence?

A: The association is responsible for the common areas and the covenants state that the board has the duty to maintain the common areas.

In my opinion, changing the fencing and eliminating some of the exterior fence would be a substantial change in appearance and access control.

Attorneys might differ in their opinions regarding the board’s authority to alter the fence, based upon the entire package of codes rather than one clause.

However, I believe the board should not alter the location of the fence. Board members should consult the association’s attorney and insurance agent regarding the board’s authority and the association’s potential exposure to risks and liabilities.

The board has the duty to maintain the fence. It is inappropriate for the board to neglect maintenance and then alter the architectural design and access control when replacement is needed.

Perhaps the fence was well-maintained but, over a period of time, has deteriorated to the point that replacement is necessary. The association should have gradually accumulated the money in the reserve funds to pay for the new fence. The board is responsible for long-term financial planning and budgeting based on a reserve study.

Now, instead of using reserve funds or perhaps because there are no reserve funds, the board wants to reduce the cost.

Replacing the existing fence amounts to about $75 per unit.

If the association does not have enough funds in the reserves, the board could vote for a special assessment from the owners to pay for the replacement of the existing fence. In my opinion, the money saved from changing the fence is not worth the additional exposure to vandalism and other risks.

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Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers.

She selects questions of general interest for the column and regrets that she cannot respond to all questions received.

Send questions to: Condo Q&A;, Box 5068, Thousand Oaks, CA 91360.