What is a Reserve Fund and Why Your HOA Needs One

Ever wonder what a reserve fund is for and why your community needs one? Equipment, major components (like roofs in a condo community), and everything from private street repairs to pool maintenance must be undertaken from time to time, regardless of whether your community has planned for the expenses.


A reserve fund, which is similar to a savings account, is a financial fund that sets aside the difference between the income and expense of an hoa.

The Reserve funds should be used on expenses that will last longer than 3 years or cost greater than $10,000.

 What is an HOA reserve fund?


Most HOAs prefer to plan ahead and set the funds aside now to avoid increasing dues or issuing special assessments when the money is needed later. Nobody likes surprise special assessments! Reserve funds are not an extra expense to your community—they just spread out expenses more evenly.

If a reserve study is obtained for an association, the planed expenditures will be listed out and explained how much should be going into reserves vs. how much should be going out and when.

There are other important reasons your HOA will put association monies into a reserve fund every month, read on for more details. 


Why HOAs Need a Reserve Fund

 Why HOAs need a reserve fund.
  1. Reserve funds meet legal, fiduciary, and professional requirements. A replacement fund may be required by:
    • Any secondary mortgage market in which the association participates (e.g., Fannie Mae, Freddie Mac, FHA, VA).
    • State statutes, regulations, or court decisions.
    • The community’s governing documents.
       
  2. Reserve funds provide for major repairs and replacements that your HOA knows will be necessary at some point in time. Although a pool may need repairs every 5-10 years, every home owner who is able to use the pool should share its replacement costs.
     
  3. Reserve funds minimize the need for special assessments or borrowing. For most home owners in an HOA community, this is the most important reason. Surprise assessments and increases in dues are not a pleasant measure to take.
     
  4. Reserve funds enhance resale values. Lenders and real estate agents are aware of the ramifications for new buyers if the reserves are inadequate. Many states require associations to disclose the amounts in their reserve funds to prospective purchasers.
     
  5. The American Institute of Certified Public Accountants (AICPA) requires the community association to disclose its reserve funds in its financial statements.

 

How Do You Set Up a Reserve Fund for Your Community?

In our discussions with boards, Heritage Property Management, Inc. constantly emphasizes the need to build the appropriate level of reserve funds. One question that comes up frequently is how best to invest the reserve funds. The three main goals of investment for associations should be to:

  1. minimize risk
  2. make sure funds are liquid
  3. earn a decent rate of return 

Associations can minimize risk by taking the appropriate steps.

 How to set up an HOA reserve fund.

The community's board of directors is responsible for choosing its investments. A good property management company can help your HOA navigate the investment options available. Heritage, for example, provides a list of institutions we deal with frequently and their current rates, but the ultimate decision lies with the board.

Once the board makes a decision on investing money, this decision should be communicated in writing to your property management company. At Heritage, when our clients notify us that they want to invest money in a reserve fund, we attempt to do as much of the leg work in getting the account set up as possible. Once an account is set up, the statements should always be addressed to the property management company so that all transactions can be properly recorded in your community's financials.


Would you like to know if your HOA has sufficient reserves for your community's needs?

Drop us a line, we'd be happy to speak to your HOA board members about their current reserve situation.

Safe Pool Water Tips for Summer

Your backyard swimming pool or neighborhood pool may look refreshing, particularly on a sweltering hot day. But if it’s not properly monitored, the water can harbor bacteria, viruses and parasites that can cause what the Centers for Disease Control (CDC) call recreational water illnesses. Instances of these ailments, which include ear and eye infections and respiratory, intestinal and skin diseases, are dramatically on the rise according to the CDC; reported cases have more than tripled in the past 20 years.

 Pool water safety tips for Atlanta residents of HOAs

If your home or community includes a swimming pool, hot tub or wading pool, take the following steps to minimize outbreaks of infections and angry homeowners:

  • Be diligent about hygiene. If you're part of the HOA, consider a sign near the pool to remind residents.
  • Change diapered children well away from the pool and its surrounding deck, and make sure all swimmers take frequent bathroom breaks. 
  • Remind swimmers not swallow pool water and to shower with soap each time they enter or leave the pool. 
  • Don’t allow pets in the water.
  • Don’t allow anyone who has an infection or illness to enter the pool area. 

Be Aware. Check the water pH and chlorine levels regularly—or have it monitored regularly by a professional pool service—particularly during times of heavy use.

If you're looking for a pool service company in the Atlanta area, check out our list of vetted pool vendors.
pool-safety-tips.jpg

Clean Pool Water = Happy Residents All Summer!

The CDC website says the following signs can indicate whether or not pool water is safe:

  • Water should be clear enough that you can see any painted stripes and the bottom of the pool.
  • The sides of the pool should be smooth and not sticky or slippery.
  • A well-chlorinated pool has little odor, while a strong chemical smell indicates a maintenance problem.
  • Make sure the pool pumps and filtration systems are in good repair and operating as they should.

Be Informed. The chemicals used to sanitize pool water are themselves toxic if used, stored or applied improperly, so make sure you know how to handle them or have a professional pool service do it for you on a prescribed schedule. 

Swimming pools are a great source of recreation, exercise and relaxation, and a little vigilance on your part can help ensure that you and your guests don’t get sick.

Visit the CDC website for more information about pool water safety. And have a fun summer!

HOA Due Process : Why It Matters

Inevitably, from time to time, community rules are broken. When this happens, the association informs residents about the problem and follows what is known as due process procedure. If it seems like it's taking longer than expected to receive a response on a specific issue, the important due process procedures may be the cause of the delay.

 What is an HOA's due process?

Simply stated, this means that the association always notifies residents of alleged violations before taking any action. Many times the HOA board will employ a management company, like Heritage Property Management, to send written notices describing the possible rule violation and ask the residents to correct the problem voluntarily by a specific date. These notices also explain any action the association may take if the violation isn’t corrected. 

The association understands that things aren’t always as they seem. So, any time notices are sent to residents, the board wants to hear the resident’s point of view. As a property management company and liaison between homeowners and HOA boards, we can arrange for residents to meet with the board before imposing any type of penalty.

In fact, imposing penalties isn’t the goal at all!

 HOA due process and appealing a decision by the board.

It’s more important that residents comply with the association rules for the good of everyone in the community. These meetings give residents and the board an opportunity to discuss rule violations informally and arrive at a solution. 

After they’ve had a chance to talk to a resident about a rule violation, board members will discuss the situation among themselves and make a decision. Residents generally receive the board’s decision in writing in about 10 business days. For those who may disagree with the decision, most HOA boards have an appeal process.

So next time it seems like you community is moving slower than an iceberg with their communications, keep in mind that there is a process in place to ensure consistency and fairness in every situation that arises.


Do you have more questions about HOA Due Process in your neighborhood? Drop us a line!

HB 410 Is Vetoed by Governor Deal

In the most recent legislative session, HB 410 was on the agenda. House Bill 410 was introduced to provide a list of information that home owners associations, property owners associations, and condominium owners associations would be required to provide upon request for a closing. The proposed legislation, if passed, would also cap the fees the association or management company could charge for preparing and providing the closing documents and information.

 HB 410 is vetoed by Governor Nathan Deal

House Bill 410 was designed to set the fee below the average of any state that is currently regulated. The proposed fee was arbitrarily low and below the cost to perform the services needed to effectuate closings on behalf of the association. The association management industry and lobbyists worked diligently all session to educate legislators on the negative impact this proposed legislation would have on the industry, associations, and owner of homes and condos in associations.

Earlier this month, Governor Nathan Deal vetoed House Bill 410. In his press release Governor Deal stated,

 Governor Nathan Deal vetos HB 410 in Georgia : photo credit the aha connection
“House Bill 410 provides a list of information that home owners associations, property owners associations, and condominium owners associations would be required to provide to a homeowner upon request and caps the fees the association could charge for producing and transferring that information. 
First, the cap provided by HB 410 is, to my knowledge, lower than that of any other state in the nation with such a cap and may not be sufficient to cover costs of providing the information required, which could result in increased costs to association members. 
Second, such associations often contract with private parties to provide these services so that association members need not complete the tasks personally, on behalf of the association. 
Consequently, it appears that HB 410 could impose burdensome responsibilities on associations and their members and, regardless, absent sufficient justification, parties should generally be left alone to dicker the terms of their private agreements without government intrusion.  For the foregoing reasons, I VETO HB 410.”

Common Georgia Insects 🐜 and How to Deal with Them

Whether you’re attacked while working in the garden, enjoying a picnic in the park or lounging by the pool, bug bites and stings are an inevitable summer annoyance. At best, bites and stings can be uncomfortable for a few days; at worst, they can be a serious, life-threatening hazard. 

There are nearly 600 common bugs and insects in Georgia. Below are just a few of the most common (and pesky) ones you should be on the look out for both inside and outside your home.

 Common Georgia insects and how to keep them out of your home.

A List of Common Georgia Insects


  • American Dog Tick
  • Asian Multicolored Lady Beetle (aka Ladybug)
  • Black Carpenter Ant
  • Black Horsefly
  • Black Widow Spider
  • Brown Marmorated Stink Bug
  • Dobsonfly
  • European Earwig
  • Mosquitos

And that's just to name a few! While many of these insects native to Georgia are actually helpful around the backyard, most homeowners would prefer they stay outdoors. There are plenty of things that can be done to create a barrier between your home and Georgia insects to keep them on the outside where they belong.

Check out our list of Georgia Pest Companies who can help your community and homeowners get control of the insects this summer.

Alternatively, local home supply stores sell a wide array of sprays and deterrents for those who don't mind spraying on a regular basis. 

But what about the insects that you just can't control while you're enjoying the beautiful Georgia weather? Well, here are some tips on how to relieve the itch or sting and when to know if you should seek medical attention.

How to Treat a Bug Bite or Sting

 How to treat a bug bite from a Georgia insect.

If the bite or sting is mildly painful or itchy, apply over-the-counter medication that contains Benadryl or cortisone for topical relief. Other home remedies, like a applying a paste made from baking soda and water, dabbing on ammonia with a cotton ball, soaking in oatmeal baths or even applying toothpaste to the site may also provide relief. 

Whatever you do, don’t scratch! This can cause an infection and leave a scar. And it won’t relieve the itch or sting. 

If you feel faint, nauseous, dizzy or disoriented, or if you experience rapid heartbeat, difficulty breathing or your lips, tongue or throat swell, call 911 immediately. These symptoms indicate a severe allergy to the insect’s venom. Administer an Epi-pen (injectable epinephrine) if one is available and administer CPR if symptoms worsen before emergency personnel arrive. After the episode, follow up with a physician who can determine an allergy prevention treatment. 

 Don't scratch those bug bites!

Stay alert for delayed symptoms around the bite or sting, like redness or swelling, which could indicate an infection or other condition. And see a doctor right away if you have a headache, fever or joint pain within a few days of being bitten. Some insects, like ticks and mosquitoes, can infect their victims with serious, flulike illnesses, such as Rocky Mountain spotted fever, Lyme disease and West Nile virus, which only a physician can diagnose and treat. 

Most important, use insect repellant when outdoors and wear light-weight, light-colored clothing over arms, legs and feet to keep insects off your skin. And avoid wearing perfume and fragrances, which can attract bugs.

What are the Responsibilities of an Architectural Committee?

Spring has finally sprung in Atlanta! If you're anything like many of the other area homeowners, you've been assessing the state of your yard, house and landscaping. With the warmer weather and fresh blooms many of us are starting to consider new home projects.

Maybe considering a new shed or fence? Some fresh landscaping or tree removal? Before you break out the miter saw, make sure to get your plans approved by our association’s architectural committee. Here's why it's important...

 What are the responsibilities of an architectural committee?

What are the responsibilities of an Architectural Committee?


  • Review plans for moderate to major exterior modifications to your property (check your community bylaws and regulations for details on what requires approval).
     
  • Approve plans for modification, and if it doesn't meet requirements, help find alternative options.
     
  • Assist in keeping the community beautiful and well maintained.
     
  • Helps to keep the property values high and the area desirable for residents and prospective new residents.

While it may seem arbitrary from an individual homeowner’s standpoint, the architectural committee looks out for the entire community. Aside from stopping residents from painting pink polka dots on their houses, the committee’s job is to make sure that the size and style of the project, the type of building materials being used and the overall look of the new structure adhere to the association’s design requirements.

Not only does this keep the community looking cohesive, it also helps to keep property values up by preventing individual structures from standing out. Of course, it’s also important to note that unapproved structures might legally have to be removed at the owner’s expense and/or may incur fines if implemented without approval, so save yourself money and headaches by getting approval before building.


Ready to start a home project?

 What does an architectural committee do?

When you’re ready to start your new project, or if the design of your project changes midway through building it, send your plans to the architectural committee first so that they can make sure the plans are in compliance with the association’s design standards.

If any issues are found, Heritage or your Architectural Committee will let you know what they are and try to help you come up with other options. HOAs appreciate all the hard work residents do to make and keep their homes and community beautiful—help everyone in your community keep the neighborhood looking great and property values high by keeping your HOA and Architectural Committee in the loop of all your building projects.


Have a question about how your specific Architectural Committee operates? Drop us a line. We'd be happy to help.

Georgia Elections Coming Up : May 22nd

With the Georgia Primary Elections just around the corner on May 22nd, we wanted to remind homeowners that whatever your political philosophy, you should exercise your individual right to help choose the people who will lead our government—at the federal, state and local levels.  Casting a ballot is an American right that people in many other countries don’t enjoy.

 Georgia Primary Elections 2018 :: © GA Tech

Just as we elect our government officials, many homeowners also have an opportunity to elect and vote for their HOA board members. If you are not happy with your current board, vote for change! If you are happy, vote for them to stay! Either way, each person's vote counts both at the national and local level, even in your own community.


When is the Georgia Primary Election in 2018?

The Georgia Primary Elections for both the Democratic and Republican parties is coming up on May 22nd. 


 When is the Georgia Primary Election 2018?

Before you can vote, you must register. You can register to vote in the State of Georgia online by visiting the online voter registration site. You can also register by filling out a paper application and mailing it in via the DMV's website. The site also included information on who is eligible to vote in Georgia elections.

And remember, if you’re an owner in good standing, you have the right to vote in our own association elections. Our campaigns aren’t covered by the worldwide media, and we don’t have bumper stickers and buttons, but they are important and do make a difference in your life.

Reach out to your Heritage Property Manager or your community HOA to find out when the next election is being held in your community.


Want to learn more about the upcoming Georgia Primary Elections this May?

Check out the Ballotpedia website for more details about who's running in both the Republican and Democratic parties.

 

Share this article online via email or social media to get the word out about the Georgia Primary Election this May by using the 'share' button below!

Understanding Property Management Fees

The adage “you pay for what you get,” is only accurate about half the time when it comes to property management. Sometimes you get what you pay for, sometimes you get over-charged… and sometimes you find a property management company who will give you a fair price and always do a good job.

But what exactly is a fair price when it comes to hiring a property manager? This is where the “what you get” element factors in. Different management companies perform different services and charge for varying fees. This article is an overview of the various fees that property managers charge to help you understand property management fees.

 How much do property management companies cost in Atlanta?

What You Should Know About Property Management Fees


One thing to keep in mind is that you don’t necessarily want to hire the manager/company with the lowest fees – whomever you hire will hold a huge responsibility, and they need to be both qualified and good at what they do – otherwise they could end up costing you a great deal of money down the road (more than saving a few percentage points in fees).

The most important factor isn’t the price, it is the quality of service to your HOA. The best way to gauge good property management service is by judging the transparency of a property manager’s fees.

 

Questions to Ask a Property Management Company


When considering a property management company ask the following questions to understand their fee structure and level of service.

  • Do they seem willing to tell you everything upfront? 
  • What are their policies? 
  • Do they have a fair system that minimizes or eliminates the potential for hidden fees?

These are the most important things to look for and if you ask the right questions, you’ll have a good chance of hiring quality managers.


Have a question about property management fees that we didn't cover? Drop us a line. We'd be happy to help.

Preparing Your Lawn and Landscape for Spring

If Punxsutawney Phil (the famous Groundhog) is right, we are in for 6 more weeks before Spring weather arrives in Georgia. That leaves homeowners plenty of time to get a jump start on preparing their lawns for the Spring season. 

 Tips for Atlanta lawn care

Lawn care and landscape maintenance is a key part of ensuring home values stay high and the neighborhood as a whole continues to be desirable to homebuyers. Most homeowners appreciate living near neighbors who care for their lawns. Maintaining a clean-looking lawn can be as simple as mowing every 5-7 days and keeping things tidy by removing down branches and debris on occasion.

While many homeowners who are clients of Heritage Property Management Services enjoy full or partial lawn maintenance by one of our trusted Atlanta lawn care providers, there are plenty others who don’t have hired lawn care or perhaps enjoy taking on the rewarding lawn work themselves. Either way, there are plenty of simple things each Atlanta homeowner can do to prep their lawns for lush, beautiful spring growth. 

How to Prepare Your Atlanta Lawn for Spring


+ Clean Up Debris

Preparing your lawn for spring starts with a bit of clearing up. On a nice dry sunny day grab your rake and garden waste bags and head outside for some spring cleaning.

+ Pull Weeds

  • Rake and dispose of old leaves, twigs, and debris from fall and winter.
  • Remove any down branches (carefully!) or hire an Atlanta area tree removal specialist.
  • Pull out any undergrowth to clear space for new spring growth.

By cleaning up your yard, especially the turf, you’re ensuring that future fertilizers won’t be blocked from reaching the soil and drainage will be optimal for new growth.

 Atlanta spring lawn care tips, what to trim in spring

+ Prune Summer-Flowering Shrubs

It may seem early, but late winter is actually the best time to start trimming those summer-flowering shrubs like hydrangeas, crape myrtles, butterfly bushes, and most types of roses. Make sure to hold off on pruning any spring-flowering shrubs though as they need a bit more time.

+ Mow Your Lawn 

Dust off the lawn mower and check it over. Clean it off and sharpen the blade if needed. Also, make sure to check the blade height while parked on a flat solid surface. 

The height of the blade makes a surprisingly big difference in the spread of weeds and overall growth of the grass. Georgia Gardener, Walter Reeves has a great reference chart for mower blade height vs. type of grass on his website.

+ Don’t Fertilize…Yet

You’ll want to wait until Spring has arrived to lay that first batch of fertilizer but a good tip to ensure you don’t miss your ‘fertilizing window’ is to swing by the lawn care store and pick up a bag or two to have ready. Then all you have to do is set a reminder on your phone or on your calendar so you don’t miss this crucial opportunity to get your landscape off to a healthy start.

Also make a call to your landscape company, if your community has one, and ask them if lawn fertilization is included in your monthly maintenance. You may be able to skip this step if it’s already provided for you.

 When to prune roses in Atanta

+ Edge Flower Beds

Late winter through early spring is a great time to edge your flower beds to create definition between the beds and the lawn. From there mulching is a breeze. Choose a good quality, heavy mulch and you’ll get more life out of it.

+ Hold off on Seeding

Brown patches, bald patches, and colorless dormant grass are typical of this time of year. Like fertilizer, resist the urge to spread new seed. When spring arrives you can lay a combination of some pre-emergent or weed killer and fertilizer. Another good reminder to put on your calendar.

+ Check the Schedule

Most lawn care providers and landscaping companies offer a maintenance schedule for homeowners. Check the website for your landscape company and print off their maintenance schedule to avoid any overlap in efforts. This also allows you to fill in any ‘gaps’ in additional maintenance you want to include in your annual lawn care.


Looking for a Lawn Care Provider for Your Community?
 

Heritage Property Management offers clients an extensive list of pre-vetted Atlanta-Area vendors, including lawn care providers, for communities. Need help choosing? Drop us a line and we’ll help you assess your community’s landscaping needs.

What Home Owner's Associations (HOAs) Should Know About Taxes

Tax season is upon us and as Benjamin Franklin once said, “in this world, nothing can be said to be certain, except death and taxes.” Unfortunately, HOAs are no exception. 

If you serve on the Board of Directors for your neighborhood’s HOA, and especially if you’re the treasurer, it might mean significantly more stress. However, there are ways to lighten the load.

A resourceful, client-focused property management company in Atlanta like Heritage Property Management understands HOAs, non-profits and how to confidently and accurately assist you by answering any relevant questions you might have.

To get you started, below are some of the most common questions and answers associated with filing taxes for an HOA.

 Do HOAs have to file taxes?

Common Questions about HOA Taxes


+ When are HOA taxes due?

“For the calendar year associations, the due date is April 15 (formerly March 15th), although it can be extended for 6 months (until October 15th) by filing an extension form (IRS Form 7004 ).” (Source)

+ Do HOAs Need to File a Tax Return?

Corporations are generally required to file taxes. Choosing which form to use for filing is a very important consideration. Read the tips below for choosing the correct tax form for your HOA.

+ Are Home Owners Associations (HOAs) Considered Non-For-Profits?

According to the IRS;

“A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally may elect under the provisions of Code section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income.”

Read on for more details.

Tips for Filing HOA Taxes


+ Which Tax Forms Should an HOA Use?

For an entity to request non-profit status, an HOA would typically use Form 1024. However, acquiring that type of status can be expensive and complex. Without a substantial reserve budget, it’s smarter to file Form 1120-H.

A property management company can help you understand which deductions you can claim, as well as organize the necessary forms and documentation to make those claims. Additionally, the property management fees themselves are also tax deductible.

+ How to Fill Out Your HOA Tax Form.

Filing an 1120-H form properly requires careful review. Be aware of your state income tax filing requirements as they can vary accordingly. They differ from Federal requirements, so please consult your community association manager if you have specific questions on your state’s return.

+ How to Account for HOA Reserves in Tax Filings.

Filing a federal return requires Form 1120, which, among other things, implies that an HOA must account for all income it collected during the year. This potentially makes reserve funding difficult.

For example, if X amount is set aside for Project Y, those funds would be taxable if they weren’t spent during the current tax year. In other words, it can negatively impact reserve budgeting, thereby affecting all its allocations.

Because HOAs are distinct from corporations, the IRS has developed Form 1120-H, a single page form that streamlines the filing process for associations. A knowledgeable property management company in Atlanta like Heritage understands this and other tax law like it.

+ How HOAs handle tax exemptions.

An HOA must formally “elect” to file Form 1120-H and it has to be done so on the 15th day of the fourth month after the end of the HOA’s tax year. With Form 1120-H, an HOA is required only to pay taxes on non-exempt income.

Non-exempt income includes:

  • Laundry or vending machine income
  • Interests
  • Rental income from an HOA owned property
  • Dividends

As with any nonexempt tax, the HOA is allowed deductions specifically for expenses directly related to those items listed above. So, for example, repairing a dryer is deductible. The final sum is then taxed at a flat rate of 30%.


Need More Help? Don't Worry!

 What is the deadline for HOA taxes?

Heritage Property Management is a full-service Atlanta property management group who can help clarify key elements of your HOA’s taxes and answer your questions. You have a partner in Heritage. Contact us today for a free consultation and proposal.