With 100% Certainty!
We’ve all heard the famous quote “Nothing is certain except for death and taxes”, often attributed to Benjamin Franklin. But we all know there are a few more certainties in life. Gravity, the sun rising every morning, and because the sun rises each morning and time marches forward in an unrelenting manner, deterioration is also inevitable. So why do so many boards, charged with maintaining the common areas of their association, fail to adequately prepare for the inevitable deterioration of the common areas?
I believe the answer is twofold. First, there is a mistaken impression that the cost of ongoing, daily deterioration is a future expense. That is an easy mistake. But the roof, and all the other common areas, deteriorate in a predictable manner every month on an ongoing basis. Don’t mistake the absence of a bill from the roof each month for the fact that every owner just used up one more month of the roof’s limited life. Since those inevitable Reserve expenses are so large, on a practical matter it is best and most fair to the always changing ownership base to pay the “deterioration” bill each month. In that way, every owner pays their fair share of monthly deterioration, and the association never falls behind these recurring monthly costs.
Second, we often hear managers report that their boards “just don’t know” how much to responsibly set aside, so they don’t feel the obligation. Again, don’t blame the roof for not sending out a bill each month. An updated Reserve Study recommends how much to set aside. The cost of common area deterioration occurs with 100% certainty. Roofs will fail. Carpet will wear. Mechanical components will deteriorate. It’s because the sun rises each morning! Just because a roof may last 18 or 22 years instead of the expected 20 doesn’t mean it is unknowable. It just means there is some variation. For those of us who commute, we know our typical commute time (average across the USA is 26.9 minutes). So we plan for that commute, even though we know some days may be faster or slower. But even though your commute time varies, continued employment dictates you plan accordingly! The same is true for Reserve contributions. There may be some minor variations, but dismissing the ongoing deterioration costs as “unknowable” will cause special assessments, deferred maintenance, and low property values for the associations who fail to prepare.
Reserve expenses will occur with 100% certainty. Making a responsible effort to budget for the ongoing repair and replacement needs of the association is the job of a community association board member, and cannot be avoided without consequence. We can say that with 100% certainty!