RESERVE FUNDS AND DROUGHT-FRIENDLY LANDSCAPING

RESERVE FUNDS AND DROUGHT-FRIENDLY LANDSCAPING

QUESTION: In light of the drought emergency, can reserve funds be used for drought-friendly landscape renovations?

ANSWER: I checked with Robert Nordlund, President of Association Reserves, Inc. to see what he thought. Following is his response:

Existing Landscape Reserves. Many associations already have landscape-related projects in their reserve study, the most common being tree trimming. Many others have periodic landscape renovation projects to freshen up the appearance and health of their greenscape. If an association has a landscape renovation reserve component, those funds could be used for replanting and redesigning with drought-tolerant plants. 

Borrowing. If they don't have funds already set aside, another strategy is to borrow from reserves with these borrowed funds expected to be recouped by savings from lower water usage. While borrowed reserve funds must be repaid within twelve months, the following allows for the delay of repayment:

...the board may, after giving the same notice required for considering a transfer, and, upon making a finding supported by documentation that a temporary delay would be in the best interests of the common interest development, temporarily delay the restoration. (Civ. Code 5515(d).)

Savings. If you find that a $50,000 landscape renovation project would result in a projected $50,000 water savings over three years, and if your reserve balance can support the expense without delaying necessary reserve projects, an updated reserve study can provide the necessary documentation. The result is a zero-interest loan from reserves to implement the project.

Additional Points. Make sure the project meets your architectural requirements. You don’t want to replace grass in your greenbelts with artificial turf if you’ve been denying homeowner requests for similar projects in their front yards. If you are installing artificial turf (or something else that will need renovation or replacement), remember to add it to your reserve component list.