Budget Season: Reserve Basics Every Texas Board Member Should Know
Rising insurance and repair costs are pushing special assessments up nationwide. Here's how boards can use reserves and a reserve study to avoid surprises.
Fall is budget season for many associations, and this year the headlines are full of five- and six-figure special assessments in condo buildings around the country. Texas communities aren't immune. The best protection is a realistic reserve plan.
What a reserve study does
A reserve study inventories the components the association must repair or replace (roofs, paving, pool plaster, fences, gates, mechanical systems), estimates their remaining useful life and replacement cost, and recommends an annual contribution so the money is there when it's needed. Updating the study every few years, and after major work, keeps the estimates honest.
Using it in the budget
- Start with the reserve line. Treat the recommended contribution as a commitment, not a plug figure.
- Compare funding to the plan. If you're underfunded, decide on a catch-up path and explain it to owners.
- Watch insurance. Premiums and deductibles are rising for many associations. Budget for the deductible you'd actually pay after a storm.
- Don't borrow from reserves for operations without a documented board decision and a repayment plan.
Condo boards: lending rules matter
Mortgage-investor rules for condominium projects, including reserve and building-condition requirements, affect whether buyers in your building can get conventional financing. Keep an eye on changes and ask your manager or CPA how they apply to you. Our news section tracks major developments.
Talk to owners early
Owners accept increases more readily when they see the plan. Share a one-page summary of the reserve study with the proposed budget, and hold the budget discussion in an open, properly noticed board meeting.
Educational only, not legal advice.