See also, Index, reserve analysis.
Amount of Reserves
Utah law does not require any particular amount of reserves for associations. It does, however, require a board to be prudent in funding reserves, thus the board must act with care, good judgment and thought for the future when deciding how much to fund reserves. This requirement carries over from the standards imposed by law on all board members, one of which is the duty to act with the care an ordinarily prudent board member of a homeowner association would exercise under similar circumstances. See Index, standard for board/director/ARC decisions and Utah Code § 16-6a-822.
Each yearly budget of an association must include a line item that identifies the amount to be placed into a reserve fund in an amount the board determines, based on the reserve analysis, to be prudent, or an amount required by the governing documents, if the governing documents require a higher amount. The owners may veto the line item by following the procedure specified by law and outlined in the Index, budget.
The board must establish and keep at least one reserve account that is separate from other association funds. See Utah Code §§ 57-8-7.5(9)(b) and 57-8a-211(9)(b) and footnote 4 thereto.
Unless a majority of the owners approve, money in a reserve fund may not be used for "daily maintenance expenses" or "for any purpose other than the purpose for which the reserve fund was established." See id. at subsection (9).
- Daily Maintenance Expenses. The acts do not define daily maintenance expenses, thus the ordinary meaning of "daily" in common usage applies, namely "of, done, made or occurring, each day or each weekday." See merriam-webster.com definition; see also dictionary.com definition. Thus, daily maintenance expenses are maintenance expenses occurring each day, or at least each workday.
- Purpose of Reserve Fund. The purpose for which a reserve fund is established is not dictated by the statute.fn1 Instead, that purpose is most often contained in
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(For reference: 57-8 is the Condo Act, 57-8a is the Community Association Act, 16-6a is the Nonprofit Act)