I wish the answer was as simple as the question. Since associations come in all different types and sizes, and in that variety there are significant differences in the common areas maintained by the association and the Operational Budget expenses, the answer is “no”.
In this busy “budget time” of year, when so many associations (those with a 12/31 Fiscal Year End) are working on their budgets, it is a good time to remind my readers why Reserve Contributions are important. And it’s not just me. A prominent Southern California attorney , Mr. Robert DeNichilo, just wrote a nice summary on his “HOA Brief” blog (to see the article, click here). In addition, as Mr. DeNichilo notes, the California Department of Real Estate has just issued a consumer warning about the dangers of underfunded community associations (to see the warning, click here).
The standard comment we get from clients, prospects, and other industry professionals is that Reserve contributions are about “preparing for the future”. Well, they’re not. Most of us have a mortgage. Some of those mortgages have a “balloon” payment at a future point in time. That is a future expense. Some of us with small kids in the house are anxious about college bills. That is a future expense. But physical deterioration goes on every day. One day a roof is new, the next day it’s not.
Good question. Often when a client challenges our replacement cost estimate because “it is way off”, we look into why their actual cost is out of line with what we expected. Typically we find it has to do with scope of work differences. One that comes to mind is a roof that was three times more expensive than we expected it would cost, which turned out to be because the association was reconfiguring a flat (low-slope) roof into a sloped, shingle roof.
This question came up twice last week, so it seemed like a good one to answer to a larger audience here in our blog. We believe Reserve Studies are a specialty. We have seen, over the last few years, some Architectural and Engineering (consulting and building envelope types) entering the field of Reserve Studies. Their strength is in other areas, and it appears that Reserve Studies have become a new service they can offer to community associations.
Apparently there are many questions on this issue at this time. The last blog entry answered the questions two people asked if our Reserve Study would replace their need for a “Building Envelope Analysis”. Earlier this week someone asked if our Reserve Study was an insurance appraisal report (please see an article related to that question on our website:
