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This is a common concern amongst Board's and Association members. The answer to this question is not short, nor is it simple. A Reserve Study, if followed, can be your Association's greatest asset. By having a Reserve Study conducted, a long-term funding plan is established to offset the costs of repairing and/or replacing various property components. The Reserve Study will provide recommendations on how to best fund future capital repairs and replacement projects.
The next consideration is to determine if your association is underfunded. A sobering statistic that has now gained federal attention due to the Surfside Condominium Collapse is that approximately 70% of associations in the United States are in fact underfunded. Did you know that the Champlain Towers had a Condo Reserve Study but it was never followed? If your HOA is underfunded and has deferred capital repairs and replacements until they have reached a critical stage, a Reserve Study will likely not be able to solve all of your HOA budgeting concerns. Already have a Reserve Study that has been generally followed? Great, then the answer is likely no!
We have some tricks up our sleeve to help you amortize, prioritize projects and keep increases to a minimum should that be the case. Don't stress!
As we learned from the Surfside Condominium Collapse, deferring capital projects or as we like to say "kicking the can down the road" has enormous repercussions and in some instances can be life threatening. Reducing your liability as a Fiduciary has never been more important. A professional Reserve Study is one of the most proven, cost-effective ways to maintain your property for years to come. A Reserve Study enables the organization to plan ahead and spread the cost of future repairs and replacements. Associations are then able to prioritize and take actionable steps to schedule work in a timely manner. Utilizing this budgeting tool it will aid the association in avoiding high cost emergency repairs and deterioration of exterior components. And you guessed it, by doing so it will help avoid special assessments and loans.
A quote from our Founder and CEO, Kevin Bobb:
"We are living in the digital era, and in an age of transparent data. What does this mean for Associations? The industry has gained federal attention, laws are quickly changing. Soon enough freedom of information requests will be required of Associations to disclose Reserve Studies to potential homebuyers."
Your home is one of your greatest assets, but if it's commonly owned elements are being poorly managed and maintained it can quickly become a burden and a financial liability. Living in a community managed by an Association often offers a care-free lifestyle and has many benefits, but these perks do come with dues and should be worry free. It's best not to turn a blind eye and to stay informed. Most boards are volunteer based and it can be a stressful job with so many to please and property managers are there to help! Your Reserve Study Provider shouldn't feel like the "tax man", they are there to help you, but ultimately it's up to the Associations to follow the Study. Educating your board members and staying up-to-date on recent legislation is a great place to start. Don't hesitate to reach out to our Sales Team to schedule a presentation with your Board or Association today!
Check updated State information regarding legislation on Reserve Studies and funding requirements. Refer to the Laws Tab on our site for more information. The Community Associations Institute also has up-to-date information as well as a clickable map and is a great resource for local information.
