Tuesday, April 13, 2021
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Tag: replacement reserve

Unfunded Obligations Come Home

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Quietly through malfeasance or simply ignorance, your condominium equity may be eroding daily and there's simply no legal protection in Virginia. While the Governor reopens rest areas with money he "borrowed" from the Virginia Retirement System, your condominium association may be following the same model in unfunded replacement reserve obligations.

There are states with adequate condominium acts; Arizona and Florida come to mind. Virginia isn't one. If you live in or own a condominium, what may be your largest investment is vulnerable to one of the most egregious yet legal Ponzi schemes. Associations should fund a replacement reserve to provide the capital for substantial renovations required over the life of the property. Roofs, parking lots, pools and a variety of costly capital assets predictably deteriorate. Virginia requires an engineering study to project these future expenses. It suggests but it neither requires associations to adequately fund a replacement reserve nor sets a standard to measure adequacy. Quite typical of the consumer protection environment in this state: always beware.