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Question: We have a board member who has missed the last three meetings, all of which were very important. One was to meet the HOA manager candidates, another was to select our new manager and the last was to approve our annual budget. He has come in late on numerous occasions and never reviews the agenda and related material ahead of time. He has two years left on his term. What can be done to get him off the board?

Answer: The board president needs to have a heart to heart with him. When he ran for office, he agreed to serve the interests of the HOA members. He clearly is not fulfilling his obligation. Either he now is willing or he is not. If he is, great! He can do that by attending future meetings regularly and by making informed decisions. If he is not willing, he should voluntarily step down so the board can appoint someone that is. If he refuses to step down, there is little that can be done unless an appropriate number of owners (according to the governing documents) votes to remove him. But most slackers, when properly challenged, will step down voluntarily.

Question: I have just read one of your articles that stated: "If the reserve fund Percent Funded is below 100%, implement a funding strategy to increase that level to the 100% goal as soon as possible."

From my research, reserve study specialists often recommend that reserves be 100% funded but add that the law does not require they be 100% funded. Our management company acknowledges the 100% funding recommendation, but states that it is not necessary. My question is there a "Percent Funded" that is a widely accepted as the "should be" level?

Answer: There are two compelling reasons why reserves should be 100% funded each and every year: fairness and fiduciary duty. Consider the example of a 30 year roof that costs $300,000 to replace. Fully funding the roof reserve requires $10,000 per year ($300,000 ÷ 30 Years). In other words, as 1/30th of the roof is used up, 1/30th of its replacement cost should be set aside in reserves. If less than 1/30th of the cost is reserved each year, the shortage will have to made up by future owners.

It is normal for a certain percentage of ownerships to turnover each year. So, the owner roster in Year 1 will likely be different in Year 5, Year 15 and Year 30. The farther in the future a repair event takes place, the more likely different owners in the future will be asked to pay for what prior owners failed to pay. Those future owners are simply not financially responsible for paying for roof reserves prior to their ownership.

Secondly, the board has a fiduciary duty to protect the interests of all owners, current and future. Under funding reserves now is contrary to the interests of future owners. If the board transfers current owner obligations to future owners, it has failed its fiduciary duty.

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