Great question! A reader asked this yesterday, describing their association as a residential association with many private homes along a common street, with little other common area assets (a gate system and a tot lot). So their idea about a landscaping upgrade would make a significant difference in their total Reserve Component List. I thought the question applied to enough associations to answer it for all our Blog readers.
The bottom line is that the Reserve Study should be performed according to reliable and repeatable National Reserve Study Standards. There is a four-part test to be used, guiding associations about what is (and isn’t!) an appropriate use of Reserve Funds. For a project to be funded through Reserves, one must be able to answer “yes” to each of the following four questions:
1) Is the component the maintenance responsibility of the association?
2) Is the component Life Limited?
3) Does the component have a predictable Remaining Useful Life?
4) Is the anticipated repair/replacement cost above a minimum threshold of significance?
In many cases, you can see that a significant landscape upgrade is appropriate for Reserve designation. It is common area, it is life limited (plants/shrubs get old and need to be replaced), it can be anticipated on a predictable schedule, and for many associations a landscape renovation project can be a significant expenditure of funds.
So if it passes the four-part test, it is appropriate to be handled through Reserves. We even had a “Dude Ranch” association that defined their riding horse stock as a Reserve component… they were assets maintained by the association, they got “old” and therefore had a limited Useful Life, they aged in a predictable manner, and a herd of horses (or a significant fraction of the herd) is a significant expense!