Roger Brown

From 2020 through April of 2022 our Brook Hollow HOA board worked diligently with its members and legal advisors to rewrite and modernize the Covenants, Conditions, and Restrictions (CC&Rs) that govern life in our HOA. This effort was necessitated in part due to the newly amended Texas Property Code of September 2021. The amended Texas Property Code encumbered homeowners associations with administrative compliance requirements that are significantly different from 1974 when the Brook Hollow HOA was originally formed. The new compliance requirements were a harbinger of change. Oh boy, don’t we just love change!

From May 2022 through the end of the year the board focused on adjusting its operating process structure, procedures and mindset to adapt to the law and the newly ratified Brook Hollow CC&Rs. A common lament shared in meetings and on the sidewalks around the neighborhood was “Well, that is not how we have done things around here in the past.”

Socrates is reputed to have said, “The secret of change is to focus all of your energy not on fighting the old, but in building on the new.”

In 2023 the HOA board will hopefully apply energy towards a more proactive fiscal planning process. The budgeting and annual reporting process require some new energy. Defining, adopting and funding a formal Prudent Reserve Fund for the first time in Brook Hollow HOA

history will be a new experience for the HOA board and its members. The board hopes that the HOA membership participates in this important effort for the future of our community. A prudent reserve is a financial tool designed to ward off the undesirable “special assessment” when a major asset needs replacement or major repair.

In the fall newsletter I wrote
“Many of our current neighbors in Brook Hollow have served as Directors and Officers of our nonprofit HOA over the years. Bill Ward, Charlie Bankston, Jack Nelson and recently Jimmy Brown have all spent several consecutive terms on the board serving as Presidents. In fact, to the best of my knowledge, those four gentlemen have collectively served the Brook Hollow community as President for the past 30 years! Wow! “

Unfortunately, Jimmy Brown (no relation) has decided not to run for re-election–thus, ending another historic chapter of leadership for our Brook Hollow HOA. His innate love for Brook Hollow has been evident through the actions that he has taken as President of the HOA for well over 10 years. Jimmy motivated me to get involved with the HOA. He has been an inspiration to me in the truly brief time that I have had the pleasure to serve with him. I feel a void already!

The following article by Attorney Lawrence Szabo discusses several aspects of HOA fiscal planning responsibilities and prudent reserves.

Don’t Allow Your HOA to Ignore Financial Needs and Operate Without Proper Reserves

Lawrence Szabo, Esq. |

Studies show that there are a growing number of homeowners associations that ignore reserve funding requirements and as a result, fail to replace common areas within the common interest community that the association is responsible for, and ignore HOA financial needs. Such a practice is a violation of the responsibilities of the board members who make the decisions for the association and will ultimately have considerable negative effects on the association.

Inadequate reserves are typically a result of several different causes, but in most instances the problem can be traced to poor decision making on the part of those who are responsible for the preparation of the association’s annual budget. Maintaining a realistic budget each year is critical to the financial success of a homeowners association. An unrealistic budget will ultimately lead to improper use and depletion of necessary reserve funds, deterioration of property that is not properly maintained, unexpected needs for special assessments on homeowners, conflicts among homeowners and board members, and a decline in the desirability and value of the property that is in the affected development.

Unfortunately, the failure to maintain proper reserves has been, and will continue to be severely impacted by financial downturns that are suffered by the association members who are responsible for payment of the assessments that are the source of the funds that are required to operate the association and maintain proper reserves. It is a common practice for homeowners who are in financial distress to stop making their payments of their share of the assessments that are due to the association. The problem becomes compounded by bankruptcies and foreclosures and the homeowner’s failure to maintain their property. This results in not only a

loss of the assessment income, but it also imposes a burden on the association to incur additional significant expenses for attorneys and other costs that are related to enforcement actions against the homeowners. In the end, the association finds itself in the position of having an underfunded budget and not having the funds that are necessary to pay the ongoing expenses.

Proper planning on the part of the association’s board of directors coupled with proactive involvement by homeowners is critical to the successful handling of insufficient revenue that is needed to pay ongoing expenses and maintain reserves. The signs of an association’s failing financial health are apparent and should not be ignored. Homeowners should make sure their board of directors provides them with the required annual financial reports for their association and take the time to actually review and digest the information that is provided. Homeowners must also react to indications that their homeowners association is in financial distress.

Ultimately, the homeowners acting collectively have the power that controls their homeowners association. By being aware of what is happening in their association and taking the time to participate and contribute to their association and the election of responsible directors who are committed to the association fulfilling its responsibilities concerning reserve studies, budgets, and assessments, the impact of periodic cash flow problems that result from unexpected occurrences can be minimized and overcome.