Can We Use Reserve Funds for Landscaping During Drought?
We receive a lot of questions from associations on how they are able to use their reserve funds and still be eligible for FHA condominium project approval. Up in our neck of the woods in New England, these questions are primarily geared towards excessive costs due to storms, especially during the winter. This past winter was particularly annoying with bitter cold and high snowfall totals. Many, if not all, associations ran over-budget due to the storms. You can read more about that topic HERE.
Currently, California is suffering a severe drought and questions are flowing in regarding use of the reserve funds to cover the costs of maintaining an aesthetic environment and to replace burned out lawns.
Association Reserves, one of the largest reserve study providers in the country, published a very comprehensive article that details the circumstances by which reserve funds can be used during times of extreme drought. The article is thorough we chose to merely provide the link rather than to attempt to summarize it here.
From an FHA condominium project approval standpoint, a severe drought is an exceptional circumstance that is beyond the control of the association. If budget overruns do occur, they must be explained and there is a great chance that FHA will ask for previous years financials to demonstrate that the association does not consistently operate at a loss.
We have assisted many association to get certified with FHA that have posted such losses due to rare circumstances such as this. FHA understands that associations work to budget for common, predictable expenses so such overruns can occur from time-to-time...so long as they don’t occur every year.
Top Photo Credit: tiverylucky/freedigitalphotos.net
The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA. We have assisted nearly 200 condominiums and we can help your association.
ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.
Please contact us with any questions regarding FHA or VA condominium project approvals. You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.
FHA/VA Condo Approval Specialist
404-433-4565 Cell Phone
860-644-3772 Fax Phone
Check out our article in Common Interest magazine on page 19!
