Category Archives: Financial Matters

What Is a Reserve Study and why do we need one?

A reserve study is an in-depth evaluation of a property’s physical components and an analysis of its reserve funds. Based on a thorough on-site inspection, a reserve study details anticipated replacements or repairs to common-area elements and recommends annual reserve funding to cover capital expenditures for the next 30 years.

Reserve studies give community association managers, board members and property owners assurance that future major property expenses are identified early and that a funding plan is in place to pay for those expenses.

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Avoiding the Special Assessment Trap

Don’t think owners won’t notice an extra charge from the association.  Prepare for a fight and plan ahead to avoid special assessments altogether.

Many community associations turn to special assessments when confronted by unanticipated repairs, but boards need to avoid making hasty decisions to fund these surprise expenses.

Special assessments should be the last resort – not the first step –

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Forever Young? Don’t Bet Your Reserves on It!

Commercial structures such as office and apartment buildings have planned obsolescence.  When they get old, they are renovated, sold or torn down and rebuilt, which usually happens every 40 to 50 years.  With our tax laws, it just doesn’t make economic sense to do otherwise. 

There is no similar economic motivation for obsolete community associations.  Condominiums and cooperatives may not be rebuilt or renovated without the approval of most of the individual shareholders.  The number of association buildings that have not been properly maintained and are at the end of their economic life is growing; and, for too many, inadequate reserves have been set aside.

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Numbers Crunch

Budget preparation may be the least favorite time of year for some association board members, especially those who are uncomfortable working with numbers or fear a deluge of homeowner complaints. 

But preparing the budget is one of the most important board responsibilities.  Yes, it can be hard work, but it’s an essential planning tool for any community.  Its effectiveness depends on the preparation and research that board members put into it. 

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