Many properties are coming of age and by that I mean associations. Associations have been around for 40 or so years but did not become the gold standard until 30 odd years ago. Many are now facing large bills for re-roofing, re-siding, foundation work, re-plumbing including deteriorating sewer lines, repainting, older electrical systems, out of date lighting and one of the most overlooked outgrown landscaping. One of the tools that Pilot uses is its expectation list, a simple tool in which the board suggests their priorities for the forthcoming year or two. Planning is the key. Each item of the reserve study should be carefully viewed to see when it needs next be replaced and secondly are the funds in place now to pay for its replacement. The answer to the second question is often “not yet”. Boards of directors tend without guidance, to look no further than one year when they do their annual budget, knowing perhaps that each of the directors may well not be there in the future, they tend not to think long term. Even a 5 year plan will be much more effective in bringing to light glaring gaps in finances.
The first step then is to identify those items in the capital budget that need replacement, their approximate cost and the method to be used to fund that cost. That means prioritizing the work, getting approximate bids for costs from favored vendors who are asked to provide just a rough estimate of costs not a formal bid as the work is not going to be scheduled for the time being.
Sadly most associations do not have the capital saved to fund all the replacements coming up, and so seek special assessments every time money is needed. Loans from banks are becoming more and more popular but all they really do in addition to provide jobs at the bank is load on an interest charge and an up front fee to the overall cost. That’s not to say that a loan is not actually the best method of funding a time sensitive repair or replacement rather than waiting for funds to accumulate from dues, while the condition of the item continues to deteriorate. I have always believed disclosure, in sharing this information with the membership so that everyone is aware of the future and no-one is surprised to learn how the association is planning to pay for replacement.