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Should your HOA return unspent Reserves when you sell?

Good luck getting that to happen!


Here’s why it makes sense in theory…


Let’s say you buy a brand new home where there is no HOA. Now wouldn’t that be the dream scenario!


Let’s also say that you are very financially prudent and you decide to start saving each year for a replacement roof that you estimate will happen in 30 years and cost $30,000.


Each year you put away $1,000 into an account and after 15 years you have saved $15,000 for the replacement roof.


Now what if you decided after 15 years it’s time to move? The roof doesn’t need to be replaced yet, so what would you do with the $15,000?


Would you tell your buyer that you have saved $15,000 for a replacement roof and they can have it?


I’m guessing your answer is “#### NO”.


But that’s exactly what happens in an HOA!


When you live in an HOA, you pay money into the Reserve Account for items to be replaced in the future. When you sell, the HOA keeps your unspent money.


Let’s use a similar example to the one above but, instead of a single family home with no HOA, you bought a condo in a 10 unit HOA.


The HOA determines that the building’s roof will need to be replaced in 30 years at a cost of $300,000. Therefore, each unit is responsible for $30,000 for the roof replacement and every year each unit pays $1,000 into the Reserve Fund.


After 15 years, there is a total $150,000 saved for the roof and $15,000 is your contribution.


As before, you decide after 15 years it’s time to move. What happens to your $15,000 for the roof replacement? The roof hasn’t been replaced yet and you won’t be living there when it gets replaced 15 years from now. So why should you pay anything for this new roof?


Did you know that unspent money in the Reserve Fund is still considered your money? The HOA is actually required to list it as a liability in their financial statements.


So, if it’s considered your money and hasn’t been spent yet, shouldn’t the HOA return it to you when you sell?

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