What if the Client Makes Other Plans?
Sometimes a client will be candid with us, and ask for the recently completed Reserve Study to be revised “because the Board has decided to not do the _________ project this year as recommended, they plan to do it __ years from now.” That puts us in an awkward position. We’ve completed the Reserve Study, and we feel it is accurate. But when the Board tells us they will not be “following the plan”, does that make the Reserve Study inaccurate and necessitate a revision? Whose Reserve Study is it?
As we should do when confronted with a dilemma, we need to go back to basics. There are two purposes of a Reserve Study – to provide budget direction to the Board of directors and management, and to disclose the current physical status of their Reserve components and the financial status of their Reserve Fund.
It is one thing for the Board to not follow our Reserve contribution recommendation. Indeed, it is only a recommendation. The Board is free to run the property in the manner they see fit, and we would never revise a Reserve Study to match their (often ill-advised) Reserve funding decisions. If we do that, it is no longer our recommendation! But it is a totally different issue for a board to suggest the Reserve Study should be changed on an issue having to do with physical or financial reality.
If the ironwork needs to be painted (the surface is chipping, peeling, or rusting), and failure to repaint at this time will cause deterioration of the fence itself, we will not back off and revise the Reserve Study to “go along” with the board’s plans to delay ironwork repainting. The same would be the case with a rec rm that is old and tired, with leftover/mismatched furniture, stains on the carpet, scuffed and stained walls, a pool table with torn felt, etc. While future costs will not increase if the refurbish project is deferred, our independent, professional opinion (which the client paid for us to give!) is that the room needs to be refurbished at this time. And finally, if the association informs us that it “hopes” to get a lump sum payment from a delinquent owner in the next 30 days which will be deposited into the Reserve Fund, should we revise the starting balance? No, as it is still wishful thinking at this time.
It would be a failure of our responsibility to the client if we were to ignore reality and push back a project, eliminate a project, or revise some financial figures because of a Board opinion. A Reserve Study is no place for wishful thinking or distorted reality. Whether prepared by an independent, credentialed professional or not, the Board, current homeowners, and prospective homeowners should find an accurate disclosure of the physical status of their Reserve components and the financial status of their Reserve Fund in their Reserve Study.