Tuesday, 14 August 2018
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This Old House - Do-it-Yourself

HOA Reserve Conundrum

Written by Posted On Wednesday, 17 January 2018 13:03

A conundrum is a riddle or puzzle. Many homeowner associations established over 30 years ago now face the conundrum of replacing common elements they were not planning for nor have the money to pay for. While HOAs commonly have responsibility for the replacement of roofing, things like plumbing, wiring, siding, concrete and streets are often not included in reserve planning since they were considered to have much longer lives than 30 years.

But after 30 years pass, suddenly that window is not only cracked, it's wide open. On buildings older than 50 years, replacement of, elevators, wiring and plumbing is more likely and a hugely expensive repair.

The idea behind updating a reserve study each and every year is that components like these that were not included in the original list a some point in time become eligible to be included in the plan. And these particular components carry larger than average price tags so when they qualify for a 30 year remaining life, they need to be added to the reserve plan so that funds can be properly reserved. If this is not done, you'll experience the Year of the Killer Special Assessment.

Another reserve plan phenomena has to do with changes in materials and designs. Some of these things are mandated by code like elevator safety or thicker walls for more insulation for improved energy efficiency. Some are triggered by current taste and technology. And now, green and sustainable building techniques add yet another layer of complexity on reserve planning.

The beauty of reserve planning is that it can grow and change as conditions do... as long as the board is doing annual revisions and updates. Keeping up with a changing world is essential in the world of reserves. Last year's reserve study is old news.

A conundrum is a riddle or puzzle. But in this particular case, the solution is within reach by using a qualified reserve study professional like a Professional Reserve Analyst (PRA). PRAs are members of the Association of Professional Reserve Analysts and have years of experience in this craft. If your HOA is getting up in years or planning a facelift, make sure your reserve plan keeps step with the changes.

For more innovative homeowner association management strategies, see www.Regenesis.net.

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Richard Thompson

Richard Thompson owns Regenesis, a management consulting company that specializes in condominium and homeowner associations. He is a nationally recognized expert on HOA management issues.

Regenesis publishes The Regenesis Report, a monthly newsletter for HOA boards, developers and managers. To subscribe, go to Regenesis.net. He can be contacted by email at rich@regenesis.net.

www.regenesis.net

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