Boards have a number of duties related to reserve accounts:
1. Maintenance. The foremost duty for boards of directors of a common interest development is to maintain the common areas. This duty is in the governing documents of every CID and is also required by law. (Civ. Code §4775.)
2. Levy Assessments. To fulfill their maintenance duties, boards must assess the membership sufficient to meet their obligations. This duty is also in the governing documents of all CIDs and required by statute.
3. Conduct Reserve Study. To properly establish the monies needed to maintain the common areas, board must conduct a reserve study and annually update it. This duty is required by law. (Civ. Code §5550.)
4. Spend the Reserves. It does no good to build a reserve account if boards don't spend it when needed. Boards must keep the development in good to first-class condition (depending on requirements outlined in the governing documents). Spending the money ties back to the over-arching primary duty to maintain the common areas.
1. Reserve Account. Reserves monies must be in their own reserve account separate from operations.
2. Review Reserves. This must be done at least quarterly.
3. Two Signatures. Any withdrawals from the reserve account require the signatures of two directors.
4. Funding Plan. Annually prepare a reserve funding plan and distribute it to the membership.
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