By Robert M. Nordlund, PE, RS
Association Reserves, Inc.
When something fails, it fails, and you replace it. Right? Well… sometimes, sometimes not. A leaking roof has clearly failed. But when do you decide that the old (ugly) gold shag carpet and beaded doorway in the clubhouse has “failed”? Should replacement of the pool heater be handled differently from the boiler that provides hot water to the entire association? And when the Reserve Study says there is zero life left, do you go ahead and replace it, or do you wait?
In the field of Reserve Studies, there are five general categories of failure modes.
1) Regular. Components in this category are items like wood painting and asphalt seal coating. These components require regular sealing or rejuvenation or the association will face significant related repair or replacement expenses. These projects are best to execute on schedule, per the Reserve Study. You may be able to squeak a little more life out, but it is often at the cost of higher repairs downstream.
2) Watch & Decide. Roofing and fencing are typical components in this category. The gradual approach of failure may be apparent, but the actual failure point may be delayed or accelerated due to weather or maintenance. For these projects, you can often make a wise decision to wait another year, if the asset is still intact.
3) Benign. Components in this category are non-critical components such as pool heaters or clubhouse trash compactors. It is not a problem to simply wait until the component fails, because it not a big deal for the association to survive a few days, waiting for the replacement component to be installed. So if the Reserve Study shows zero life, wait.
4) Catastrophic. These are components whose function is essential to the association: the central hot water system, entry gate systems, etc. Failure of any of these components is always unwelcome, and it causes significant expense or disruption in the association. Do these projects in advance of failure, on your terms, on schedule, to minimize inconvenience to the homeowners.
5) Obsolescence (technological or aesthetic). These components have functional lives longer than they can be described as “bringing value to the association”. The gold shag carpet in the clubhouse, the old and dated appearance of the elevator interior, and the old computer used by the on-site manager are three good examples. While you can generally get away with deferring these projects another year, you do so at your own detriment. These are generally the low cost projects that yield a high impact (reward) to your sense of well-being and style. So do them if at all possible, on schedule.
In summary, understanding the different reasons why a component needs replacing helps you make wise decisions about when to replace the component. So be aware of the projects scheduled to occur this year, and make wise decisions, not “penny-wise and pound-foolish” decisions.