Use of HOA Reserves

[Lambo]

Jurisdiction

Washington

Our new HOA has a dying park due to no irrigation system. Can we use 'reserves' to pay for one?

 

[Michael Wechsler]

Speak to your homeowners association. There is usually no hard and fast rule that applies to all HOAs.

 

[Lambo]

Thank you so much for your reply. I am the president of a 4-person board governing an HOA of 36 homeowners. We put the project in our 2017 budget as a spending project using 'reserves' which was approved unanimously at our meeting earlier this month. After the meeting someone raised a concern, saying that they heard that Washington state law says that 'reserves' cannot be used for a project like that. They say that state law specifies that 'reserves' can only be used to repair or replace existing structures.

 

[army judge]

Thank you so much for your reply. I am the president of a 4-person board governing an HOA of 36 homeowners. We put the project in our 2017 budget as a spending project using 'reserves' which was approved unanimously at our meeting earlier this month. After the meeting someone raised a concern, saying that they heard that Washington state law says that 'reserves' cannot be used for a project like that. They say that state law specifies that 'reserves' can only be used to repair or replace existing structures.

As HOA president, you should seek the advice and counsel of a WA state lawyer.

You want to make sure you are in compliance with all of your state's laws.

 

[Michael Wechsler]

Agreed. To elaborate since I didn't have time, it depends upon what you're specifically referring (such as the encouraged "reserve account") and also these cases are fact specific. You may be referring to this law:

Washington State Law, Title 64, Chapter 64.38 Chapter 64.38 RCW HOMEOWNERS' ASSOCIATIONS

64.38.065 Reserve account and study.
(1) An association is encouraged to establish a reserve account with a financial institution to fund major maintenance, repair, and replacement of common elements, including limited common elements that will require major maintenance, repair, or replacement within thirty years. If the association establishes a reserve account, the account must be in the name of the association. The board of directors is responsible for administering the reserve account.

This is not my area of specialty and I am not a licensed Washington State Attorney. Note that the language of the statute uses words like "encouraged" and also "major maintenance" for which it's certainly possible that such an irrigation system may be required in order to maintain a "common element" as you describe. As such, you should seek counsel of a licensed Washington State Real Estate Attorney to confirm whether such an expenditure would be lawful. That's what monthly maintenance payments are also supposed to cover - proper legal assistance.