surplus operating funds

What is the name of your state? California
We have a cash surplus in the operating account (not the reserve funds). CCNR's state that owners are to vote as whether to refund the surplus or as to whether carry it over to future assessment periods. A majority just wants to roll the funds over to the reserve fund. Can they do that? If there is no vote, can I just apply my share of the surplus to future assessments (meaning not paying til surplus is used up)?

Are they presently maintaining an adequate "reserve for replacement"? Lack of one can affect mortgageablity and thus resale value. And of course emergancy funds for unknowns.

Even if there was a lack of adequate reserve or emergency funds, can the association assess excessive operating contributions and then roll them automatically over to reserve funds afterwards? I do not think so! It seems wrong to me to overblow the operating budget with the intent to fill the reserve.
Plus I never heard about "emergency funds" being assessed in a condo association, in case of an costly emergency state law and most CCNR's allow special assessments to be collected.

I have been involved in the sale of hundreds of condominium units in many various developments. A "well run" association is considered one whose budget anticipates the functional obsolescence of various systems (any common area roofs, fences, flooring replacment, basement flood damage from sump pump failure, furnaces or AC units, pool, clubhouse, legal needs, etc) and has a replacement timetable to fund the repairs as they come up. Lenders who are deciding whether to extend a loan in a particular development DO take budget and a history or absence of special assessments into consideration. They do not like budget busting potential special assessments that may kick a borderline borrower into a default. Instead, it is considered better for an association to maintain a reserve for future replacements of systems all are getting the benefit and use us of. Don't believe me? Call some condo association management companies, or condo specialty RE firms. A few extra dollars from all every month is far easier to take than suddenly needing to assess owners $1000 or so each unit.

I've been a condo owner- I would not buy in a development that is not maintaining an adequate reserve-regardless of how nice an individual unit may be.

A condo association is generally expected to budget for both long term and short term expenses.

I totally agree! The association is supposed to have a reserve study done on a regular basis to estimate the future cost of maintenance and replacement of the common area. The annualized share of that cost should be the reserve part of the regular assessment. These contributions to the reserve of the association were never my concern.
My question was about the yearly recurring expenses known as operating expenses (insurance, cleaning, water, electric etc.). If the association has overestimated these expenses for the fiscal year and assessed the operational (NOT the reserve) part of the regular assessment too high, what is supposed to happen with the excess funds. Wouldn't spending that cash surplus on reserve matters be as much a misappropriation of funds as using reserve funds for operational purposes?

Good discussion. Doe the HOA have 100% reserves collected based on the reserve study?

OPERATING not reserve

We do not have reached 100% yet, but still I think regardless of the amount held in reserve, the association cannot under any circumstance divert the cash surplus in operating over to the reserve. Am I wrong?

jesse10 said:

We do not have reached 100% yet, but still I think regardless of the amount held in reserve, the association cannot under any circumstance divert the cash surplus in operating over to the reserve. Am I wrong?

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**A: generally yes. Most of the HOA docs that I have reviewed allows this and allows reserve funds to go into Operating fund, subject to certain conditions.