Condo Media - July 2012 - 44

RESERVES

by Jack Carr, P.E., RS, LEED-AP

Your Condo’s Future
Planning for the Expected — and the Unexpected
have been meeting with a different condominium board or homeowners association’s facilities committee at least once a week. They are all different. Someone suggested when I retire I should write a book and call it “All Condos — Great and Small.” With all of the differences they have, they all have one service need in common: It’s all about protecting the unit owner’s net worth and quality of life. Property managers have always known this. They know they are in the people business. They also know, in dealing with groups of people, consensus can be a challenge. This is also a lesson most board members have experienced. The long-term solution to this challenge is simple: Condos need a plan. In managing the operations of a condominium, a long-term business plan solves the primary problems of the condo world, namely perceived fairness to all owners; consistency in the periodic transition of management; and the association’s fiscal responsibility. Whereas the day-to-day operational issues are managed by procedures and administrative rules, the long-term capital repair needs require a comprehensive plan to cover the expected and unexpected.

Reasons for a Plan
The issue of fairness is interesting. It goes to the heart of community living and the recognition that not all people are equal from the point of view of wealth, health or tolerance of deferred maintenance. Yet the capital spending decisions have to be made on a fair and rational basis. We have all heard the discussions at general association or board meetings of owners trying to stall or stop the

spending of funds required for needed improvements. I recall one such discussion concerning siding replacement when one senior owner stood up at a meeting and asked for the project to be delayed a few years. As she put it, she did not even buy green bananas, as she wasn’t sure she would be around long enough to enjoy them. Another discussion revolved around the need to replace deteriorating roofs. An owner said he was retiring to Florida in a year, so why should he endure a jump in his assessments to fund new roofs he will never enjoy? In response, I suggested that of all the owners in the community, he needed this roofing project to be approved as soon as possible. I explained if he’s planning to sell his unit, he needs a reroofing plan in place to avoid his asking price being heavily discounted due to the poor condition of the roofs. His relatively small assessment increase could have a dramatic effect on his ability to sell the unit at the price he needs for his retirement plans. The second reason for having a longterm plan is the changing of the board’s membership or property managers. The plan provides a bridge from one administration to the next. The third reason is fiscal responsibility of the board members, in particular, and the association, in general. The real estate downturn has resulted in more stringent local and federal rules of condo governance and loan eligibility related to current capital needs plans and levels of reserve funds. The real estate industry is no longer treating the marketing of condominiums as if they were selling apartments. Realtors are

reminded they are not only selling the space between the walls, but also an entire community with its fiscal and maintenance baggage. This has broadened disclosure requirements.

Involving Professionals
In parallel with this is the emphasis of recognizing the importance of the property management field and treating it as a profession with its own standard practices and ethical codes. Community Association Institute (CAI) has seen a growth in demand for its formal Professional Management Development Program (PMDP), including its M-100 and M200 series courses for earning the ascending certification and designations, including Certified Manager of Community Associations (CMCA), Association Management Specialist (AMS) and Professional Community Association Manager (PCAM). With this rise in professionalism, condo boards demand a higher level of competence in their association’s reserve fund plans. This has given rise to CAI’s reserve fund specialist (RS) designation to recognize those engineers who meet a rigorous standard of reserve fund experience, technical education, and comply with a specific code of ethics. The good news is it has become easier to find qualified managers and reserve fund study firms. The standards for a suitable reserve fund study have been well-established. Developing a scope of services for a Request for Proposal (RFP) is available from CAI’s standards guide. All reserve fund studies should include: Component Inventory, Condition Assessment, Life and

CONDO MEDIA • JULY 2012

Condo Media - July 2012

Table of Contents for the Digital Edition of Condo Media - July 2012