Most homeowners associations have what is called a reserve fund. It is a fund where money is put away to cover major capital expenses.
Google AI explains it as follows;
An HOA reserve fund is a dedicated savings account that an Homeowners Association (HOA) establishes to cover major, non-recurring expenses like roof replacements, repaving, or pool repairs. It’s essentially a long-term savings plan to avoid special assessments or significant dues increases when these large-scale projects arise.Â
So, how do you know how much to put in your reserve fund? The homeowners association gets what is called a reserve study. There are many reserve study companies out there. You hire one, they gather all the information as to what the homeowners association is responsible for, give each item a lifespan, determine what it would cost to replace each item, and then tell you how much you need in your reserve fund. This prevents not having the money when capital items need to be replaced.
Generally, homeowners associations have two bank accounts. One is the operating account, used for day to day expenses. The second one is the reserve fund account. Normally, capital expense items are not paid for out of the operating account.
This prevents special assessments, and huge monthly dues raising.
Here is what Community Associations Institute says about reserve funds;
https://www.caionline.org/advocacy/public-policies/reserve-study-and-funding/