Ways to Pay for Common Area Replacement Expenses

In completing reserve studies for HOA and Condominium Communities we are always reminding Boards and Community Members that common area expenses will occur whether the necessary funds have been set aside or not. The expenses in our reserve study reports are real and to ignore them or just kick the expenses down the road are both fiscally irresponsible and not in the best interest of the community as a whole. While the expenses will occur communities typically have one of several options in how they are paid for and not all are created equally. 1. Regular Assessment Dues – This is by far the cheapest and fairest to the current and future… Read More

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Paying the Piper – Special Assessment Reality

You’re a member of an Association which has a $200,000 roof replacement, a $20,000 swimming pool resurface, a $35,000 recreation building remodel and numerous other common area expenses that are expected to be incurred in the next 10-20 years. You as a member utilize these common areas every day and happily live the life of a condominium owner. This has worked out great for you and your neighboring community members. Life is good and you truly believe that this is the way to live as by splitting the cost between everyone, you are all able to be provided the luxuries that would be much too costly on your own. Moving… Read More

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Cost Estimates & Being too Optimistic in Reserve Studies

In reviewing prior reserve studies we often find that the cost figures of components are often too optimistic for adequate funding of the reserve account. Sometimes this is a reserve study professional who has changed these figures at the request of the Board but more often we have seen these figures being changed during update years when Board members update a study themselves, often utilizing costs figures taken from Internet searches which typically only provide partial cost data and are rarely accurate for multi-family and commercial construction. This can severely impact the short and long term funding objectives and place the community in a poor funding position with high risk… Read More

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Reserve Study Basics for Property Managers

For a property manager learning the ropes of their craft and how common interest communities operate the connected reserve study industry can seem confusing; we will go over the basics of reserve studies for common interest communities in this article. What a Reserve Study Is and What a Reserve Study is Not There is often confusion with Board Members and other Vendors as to what the reserve study is and what it is not. Below is a breakdown of what you should expect of a reserve study when ordering for any Association you are working with: A Reserve Study Is: A budgeting tool utilized by an Association for the long term… Read More

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Comparing Reserve Account Levels

Boards are often interested in how their Association’s reserve account balance is compared to other common interest communities (Condominiums, PUD, and HOA) in the area. Since each community has a unique common area component inventory just comparing the reserve account balances is not sufficient to compare communities for reserve fund strength. However there is a measure of reserve level adequacy known as “Percent Funded” which is provided in the reserve study which can be a good measure to compare communities with respects to funding levels.   Percent Funded Measurement   Percent funded is the measure of how much a community actually has in its reserve account versus how much it… Read More

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Suggestions for Changing Boards of Common Interest Communities

As communities Boards change over time there is often a change in direction for a community with regards to how common areas are funded or which projects are most important to the present community membership. A reserve study completed for new Boards will help to guide them in their specific direction as a reserve study provides an outline of the costs Associated with replacement of common area components as well as includes funding plans based on the client’s goals, statutory requirements and our recommendations based on our experience with similar communities.   Just Completing a Reserve Study is not Enough Just having a reserve study completed is not enough for… Read More

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The Fight Against Inflation – A Silent Assassin

Is the title overdramatic? Perhaps, but inflation is the reason many communities are in such dire financial straits, it’s silent, invisible and hits your pocket book right when you least expect it. The community that has been saving for a roof replacement for twenty four years but doesn’t tackle this silent assassin will find out they only have half the amount needed to replace the roof – slice…inflation… ​ What is Inflation? Inflation is the reduction in your purchasing power over time which causes prices to increase. It’s the main reason why your house is worth more, the car you drive is more expensive and a candy bar is double… Read More

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Protect Condominium Values – Utilize a Reserve Study

Making the appropriate decisions to adequately fund a reserve account is one of the most basic responsibilities of a Board. Reserve funds are utilized to pay for projected common area expenses like roof replacement, paint or asphalt overlays. Unfortunately for most condominium communities this basic community need is not being met as the majority of communities are severely underfunded, where reliance on special assessments and loans is highest. We have seen that the communities which have lower funding levels (ie. their reserve fund balance is significantly lower than an ideal amount) also have issues with financing units for sales/refinance, have marketability issues with Brokers & Buyers and are typically impacted… Read More

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Fire Sprinkler Installation and Earthquake Retrofit – Are They Reserve Account Expenses?

Without a doubt installation of fire sprinklers and earthquake retrofits make buildings safer and could save lives when and if they should ever be needed. Some municipalities have passed rules for installation/upgrading/modernization of these systems but most have chosen to forego putting anything into law as the cost to the owner(s) of the building can be very high. The question we are tackling from our perspective is; should the installation of these systems be paid for from the Reserve Account? Most often we advise that these system installations projects should not be budgeted for and paid from the Reserve Account as they are not current components; the past/current members have… Read More

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Deck / Lanai Refurbishment, Replacement, Maintenance – A Common Budgeting Mistake

  Decks / Lanais systems are typically one of the larger project expenses a community will face. Budgeting for their short and long term care is not always as straightforward as it appears to be as the degree of deterioration of this component is heavily reliant on historical maintenance trends in the community. I will touch on one of the more common budgeting mistakes we see on a regular basis. Maintenance and proper care will actually save a community a significant amount of money in the long run; deciding who (and how) this component is maintained can have a significant impact on the budgeting recommendations in the reserve study as… Read More

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