Homeowners Association Reserve Study
2/24/2012 1:12 PM
Submitted by J. Debes
Often, Homeowners Associations engage a third party to provide them with a "reserve study" to determine what major maintenance related expenditures will the Association likely incur in upcoming years - roof replacements, asphalt replacements, siding replacements? In addition, at what cost to the association? These studies often have a price tag of several thousand dollars. Unfortunately, many Homeowners Associations waste money on such studies.
Any qualified management company should have the necessary experience and contacts (engineers, architects, contractors) to coordinate this task, thereby providing their client significant savings.
At THE CABOT GROUP, our management/facilities professionals have accumulated a wealth of knowledge when it comes to construction, engineering, and property maintenance as well as an extensive vendor database and we use these resources collectively to provide each association we manage with a "maintenance reserve schedule". This document forecasts the capital needs of the Association years into the future, accurately identifying expenditures, expenses, and the year in which the expenditures are most likely to occur based on the remaining useful life of each component. We typically base our cost assumptions on current pricing and then adjust them for inflation - so each Association can dependably predict the future funding requirements of the property.
This document is one of the most critical planning tools for any Association, as it allows the Association Board of Directors to assess the current balance of the capital reserves/maintenance fund and determine whether the current savings are likely to accumulate/appreciate adequately to meet the future needs of the Association. As anyone familiar with Homeowners Association knows, there is nothing homeowners dread more than a special assessment. With proper planning and guidance, associations should have the ability to meet their capital needs without relying upon special assessments.