In a common-interest development, the funds are managed through a board of directors (BOD) elected by the homeowners' association (HOA) from the existing owners.
As outlined in the CC&Rs the board is responsible for producing budgets for the maintenance fees to be assessed to the owners.
Since the governing body is charged with the responsibility of maintaining and protecting the association's assets, it is important that cash reserves are available in case major repairs or replacements are needed.
A lack of reserve funds could result in the imposition of special assessments or loans, which would affect the financial stability of the community and property values.
[10] Typically, nearly two-thirds of the total replacement/maintenance costs for a particular property are associated with apartment interiors, with the remainder for common area facilities.