Tag Archives: Reserve study

Association Boards, Things You Should Have Learned From the News


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Here are examples of a few lessons that should have been learned by reading the newspapers:

  • There is no substitute for good financial management and a solid reserve program.

The combination of foreclosures, budget deficits, embezzlement and the inability to continue with the maintenance was felt in Community Associations across the country. Those Associations which had to cut corners, or assessments, are often found in deeper problems, and in some extreme cases, in the street. This is the time to be smart.

  • Disasters happen – do not bet the HOA that you will be spared.

The last two years have seen not only a financial disaster hit the U.S., but also a string of natural disasters that have severely affected a large number of Homeowner and Condominium Associations. Many did not have flood insurance, or increased deductible or lower limits of their insurance coverage. Many canceled special policies that covered hurricane, earthquake, wind or other things that they hoped would miss them. Too often, it was the wrong bet. As a result, some organizations simply disappeared, owners forced to leave, the units condemned, without any hope of recovery. Some had to sell the buildings damaged at a great loss and move on. Others had to live for months outside the homes in hotels with only some or none of the costs covered, while the Board has wrestled with insurance companies, contractors and the courts. Insurance is one of the most important things that boards have to deal with.  Do not bet on the future of the Association, Mother nature may try to ignore you.

  • Find a way to deal with “going green“, without confusion, expense and visibility.

In nature (and often the CC & R), Associations,  are resistant to change. But this is not going away, and the Association is almost always going to come through to look bad when they resist any change. Clothes lines, solar panels, false grass, landscaping and other items are only the beginning. Start with an owners vote on how they feel about various issues and real information (not just rumors) about how they will help and what are the options. It can be a single owner that poses a problem, but you can expect many more to follow.

  • Flags cause problems – no flags allowed at all causes even more problems.

If you allow the U.S. flag to fly on holidays with a bracket attached to the unit / home, you can almost count on someone  pushing to do more. They want to fly the flag every day, on a pole 20 feet in front of your unit / home, or a service flag for the Navy or Marine, or the stars in the windows to show a family in danger, or flag college game day, etc, etc, etc. Someone will always push the envelope. Again, just survey the residents and see what is the general consensus, which the majority will support. This is not only an individual problem, the Board must decide and then publish.

  • If you’re not active on the internet, it is very likely you will be found “on” the internet.

The number of sites created by the owner of the individual to attack or publish less than favorable information about your Association has grown exponentially. You can get on the Internet for almost no cost and see what is published can  stay forever. Transparency of operations and multiple methods of communication must be a primary consideration of the board. Do not keep putting it off. Get connected now.

  • State legislatures will cost the HOA more money unless the owners SHOW UP.

Since there is very little actual data about Associations and owners available, state legislators often act due to the squeakiest wheel, usually one or two owners who have beaten their heads with the Board. Who is really to blame rarely counts.  It is what you can give a legislator in particular. The positive exposure usually results in bills that will cost money from the owners. Boards should be aware of how legislation will impact the potential of the Association and all owners and find a way to voice their position.

Riverside Property Management, Inc. is a leading provider of financial reporting, maintenance and governance, legal collection procedures and management consulting services for Homeowners Associations and Conominiums in the Atlanta Metro area..

Our clients include homeowners associations and developers of multi-family, owner-occupied housing throughout the Atlanta Metro area.

Our team includes certified Professional Community Managers (PCAM), Licensed Real Eastate Agents (RES) and a Board Certified Collection Attorney (ESQ), licensed in Georgia, who all specialize in maintaining property condition, collection of  assessments and enforcement of existing Covenants.  Individual consultations, management reviews and educational workshops for association boards, to help improve their community governance skills.

We also provide critical budget and financial planning tools that include reserve studies and budget projections for maintenance and repair costs of community owned assets.

Detailed reserve studies and maintenance plans prepared in conjunction with our consulting architect are one of the most valuable management tools available for any association. If you are interested in long range financial planning and supervised maintenance of community assets, our services will be of benefit to your association.

Developers will find our company invaluable when planning a new construction or conversion project. Reserve studies, maintenance plans and operating budgets required for all newly formed associations are available from our company.

For more information about Riverside Property Management and the services we offer please take the time to browse our website and feel free to call our offices to speak with a licensed representative of our company.

(678) 866-1436
info@riversidepropertymgt.com

Do Research Before Voting Down the Association Budget


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Q: I live in a small, 70-unit condominium project, and we are having terrible money problems, mainly steming from the misappropriation of funds from the management company.

We are having a meeting where our homeowners’ association board is expected to ask for its third assessment in two years.

A group of residents sent letters to homeowners asking them to vote down the proposed new assessments and increased dues, and to get a new management company. What is the percentage of votes needed to stop the board from increasing our costs?

A: You always want to be careful when making statements that the management company has misappropriated funds from the association.

Such a statement needs to be made from actual facts that came be obtained from an audit. If the management company did misappropriate funds, an immediate complaint should be filed with the Nevada Real Estate Division.

Your board sets the priorities as to where the money will be spent and most of your funds are probably being used for insurance, utilities, annual financial report from a certified public accountant, management fees and maintenance contracts.

Condominium projects tend to have higher operating expenses because of the maintenance, repair and or replacement of the roofs, exterior painting and plumbing/mold/water leaks.

In addition, state law requires the association properly funds the reserve account. It would not surprise me if your association has a delinquency issue that is contributing to the financial deficit.

You need to make an intelligent decision to review a projected 2012 budget, 2011 year-to-date financial report, an accounting of the total dollars owed to the association and an estimate of how much of the debt is collectable, the reserve study — more specifically what is the projected ending balance for the reserves for 2011 and 2012 — plus the anticipated capital expenses for 2012 and monthly contractual expenses for the association for 2011 and projected 2012.

After reviewing these financial documents, you may discover that without an increase in assessments, you may have to cut services for the association to pay its regular operating expenses.

Assuming that an increase is not warranted, you would need a majority or more (look at your covenants) of members to reject the proposed budget, which calls for an increase, at a meeting in person or by proxy.

If the proposed budget is rejected, then the previous budget remains in place until a new budget is prepared by the board, to be either ratified or rejected by the membership.

If you do not have the percentage of owners to reject the budget at the ratification meeting, then by state law the budget is ratified.

Depending upon your governing documents, look at assessments and voting, you may need 51 percent or as high as 75 percent of the voting members to reject budget.

As to changing the management company, it is the authority of the board to select, hire and fire its contractors. You would need to either convince the board to make a change using membership pressure or elect new board members who would make the change.

Source: http://www.lvrj.com/real_estate/do-research-before-voting-down-budget-132843408.html

Brought to you by Riverside Property Management, Inc. (678) 866-1436

HOA Website Information


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A Home Owners Association that has accurate and reliable information is extremely important for your community. Prospective buyers, realtors and title companies need to know who to contact to provide closing documents. Members of the HOA need to know who to contact for general information, the application of architectural standards and money matters.

Providing online information provides for 24 / 7 self-help and reduces the time requirements for both the board and management. Providing contact information conveys the openness and responsiveness of the association Board. Try these steps to ensure that your contact information is useful to your community:

1. Provide board member contact information, as long as the person approves the release of this information. If you do not have a phone number with voice mail and HOA email address create an email such as info@myhoa.com  for your Owners Association.

2. If you have committees, describe the duties of each committee and the names of those who serve.

3. Post a calendar that includes due dates, annual meetings and the committee meetings, as well as social events and pending repairs (painting, roofing, etc.).

4. Add photos of members of the board.

5. Provide the greatest amount of self-help and information possible, such as newsletters, governing documents, the approved budget, the reserve study and rules/regulations.

6. Update contact information when a change occurs. While the organization and updating of this information takes some time, in the long run, it will save you time and time is money.

With over 40 years of combined industry experience, the Executive Staff of Riverside Property Management  knows that the most successful communities are those where there is a sense of unity and pride among the membership; this unity and pride begins with a firm foundation comprised of:

Well defined policies and objectives
A strategic plan and future vision
A proactive Management team
Mutual team trust and respect
Timely and open communication
Excellent customer service
Industry knowledge
“Out of the Box” Thinking
Services designed to meet your needs

Give us fifteen minutes of your time and we can show you how to put your community on a fast track to success; if you don’t believe us, feel free to call upon any one of our satisfied clients.

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Smooth Budget Planning for Your Association


Your association has a budget? If so, how is it prepared? Is it even followed? Here, we offer tips for creating a budget process that works well for most associations.  Learn the basics first . Begin the budget process by … Continue reading

Old Ben Was Right


One of the earliest advocates of preventive maintenance was Ben Franklin. He wisely wrote: “A little neglect may breed mischief…for want of a nail, the shoe was lost; for want of a shoe the horse was lost…” Old Ben nailed what happens when relatively small repairs. Little things have major impact on homeowner association assets. For example, a small lack of flashing can lead to major dryrot, structural problems and major expense. Ka-CHING!

Preventive maintenance is critical to managing an HOA’s assets. When executed properly, it extends the useful life of buildings, grounds and equipment. Stretching out useful lives means stretching member contributions and reducing downtime from component failures. Preventive maintenance involves fixing something before it breaks. Here are five objectives for a every preventive maintenance program:

  1. To perform maintenance that keeps the property safe and functioning.
  2. To promote the most effective and efficient use of resources.
  3. To estimate the human resources needed for proper operation and maintenance.
  4. To determine long range funding requirements and project scheduling.
  5. To evaluate the effectiveness of the maintenance effort.

Preventive maintenance programs are common with elevators, HVAC and pool equipment, usually because there is a service contract. Other components, like paving, roofing, decks and paint require monitoring and planning.

Functional obsolescence is also a legitimate concern. Lack of parts, improvements in efficiency, computerization and changes in fire and building code can make equipment obsolete even though it’s working just as designed. This is particularly applicable to elevators, boilers, pumps and HVAC. Buying new equipment is often a great investment in reduced operating costs. For example, by replacing all common area lighting with compact fluorescent bulbs, the light level will be significantly increased, the energy consumption reduced by 70% and the useful life of each bulb extended by 10-15 times thereby saving an enormous amount of labor costs. Within 12-18 months, the cost will be recouped in energy savings and then, it’s money in the bank.

So, what is the best way to address major preventive maintenance? Two words: Reserve Study. A Reserve Study identifies all the significant components that the HOA is responsible to maintain, assesses current condition, cost of repair and replacement and charts a 30 year maintenance plan to keep the components in their best condition.

The Reserve Study can provide for cyclical preventive maintenance so components achieve their optimal lives. For example If cracks, minor repairs and sealcoating are performed at least every five years on asphalt paving, major repairs will not be required for 20-30 years. If this relatively inexpensive preventive maintenance is not done, significant and costly major repairs will be required much sooner. Pay a little to save a lot.

A Reserve Study will also guide the board how to systematically accumulate funds without special assessments. A full funding plan will have all owners contribute a fair share relating to the benefits received. A fair contribution plan means no one will get a better deal than anyone else and the money will be there when needed. The Reserve Study is absolutely the best way to prepare for a future which will certainly come to pass.

Remember Old Ben’s nail analogy. Little things have a way of causing great things to happen. But rather than fail in the little things, plan for them and hit this nail right on the head.

by Richard Thompson

On the Fence


Fences provide privacy, boost safety and security and can add just the right aesthetic touch to the landscape.  But they also require maintenance, repair and replacement.

Fencing can be an ongoing problem for all associations, especially as communities and their features begin to age. Associations must budget for the care of these integral structures. Deciding when and how to repair your fencing, replace worn down or rotting parts or hire someone to handle maintenance can mean the difference between meeting or exceeding your annual budget. Fence

When faced with aging fencing and the high costs of replacement, community associations have to form a strategic plan of action to ensure a cost effective use of operating funds, while at the same time employing an effective use of reserve funds. The case study that follows demonstrates how investigation into a current maintenance process can result in better service for residents, cost savings, improved budget forecasting and an increase in reserve funding levels.

FINDING A FIX

A community of approximately 700 single-family homes located in North San Diego, Calif, was recently faced with the challenge of developing a long-term strategy for managing its fences. Like many communities, this association had been allocating resources for fencing only through reserve funds, and solely on the basis of major component replacement and repair.  The existing wrought iron fence was installed in 1990, and originally was painted with two-part epoxy paint that lasted about nine years. Subsequently, the fence was painted in 1999 with Frazee Am-Plate paint, which did not last as long and is currently deteriorating.

In reviewing its procedures, the association sought to find a long-term, sustainable process for managing its fence maintenance and repair budget. With the assistance of its management company, the association conducted a study and analysis to review the fencing asset and refurbishing project.

The association had been using a deferred maintenance-only approach for the community’s 28,000 linear feet of fencing, which comprises approximately 2,600 four-by-four wooden posts and nearly 3,200 iron panels. The fence was being repaired only when there was noticeable damage or paint erosion, which is often costly and inefficient.

Under the deferred maintenance and replacement approach, which was dictated by a previous reserve study, fencing was broken into four categories: phases one, two and three and pool fencing.  All fencing components had a remaining life of two to seven years with a total replacement cost of more than $1.6 million. All the wrought iron fencing was slated for painting costs of $180,000 every five years using reserve funds. Until recently, the association did not incorporate into the operating budget a proactive annual maintenance component to coincide with strategic designations of reserve capital.

There’s a better way to maintain fences. You wouldn’t repair your car only once every seven years; you perform ongoing maintenance. The same logic can be applied to repairing and maintaining the association’s fencing.

The other issue for the association had been response time. Previously, when a homeowner submitted a request for fence repairs near or around his or her home, the process from initial review of the request to completion usually took two months or more. To begin to resolve the inherent problems in that approach, the association needed to investigate the costs related to a broader scope offence overhaul and repairs.

The association collected three bids to bring the fence to like-new condition using reserve capital and then funds from the operating account for ongoing maintenance. The association’s reserve study analysts deemed the funding strategy acceptable upon the premise that the maintenance program would be reviewed on an annual basis.

PROBLEM SOLVED

Beginning this year, the association started using an immediate portion of reserve funding-approximately 25 percent of the $1.6 million estimated for complete replacement-to update its fences. The association allocated enough reserve funds to add a buffer to all of the contractor bids, which were substantially below the allotted amount. It wanted to allow enough room in case there were rising costs. In addition to the earmarked funds to replace the fencing, all of the bids included quotes to maintain the fencing in a like-new condition for an indefinite period of time. The maintenance includes 40 hours per month, allocating $1,600 in labor costs and $600 per month for materials. This monthly maintenance strategy allows the association to implement ongoing, proactive fence maintenance rather than the reactive, deferred maintenance-replacement approach that was so problematic.

In addition, the association allotted $100,000 every eight years in reserve funds as a strategic designation of capital that allows for catastrophic fence failure or other needs. In total, the association will designate approximately $1.6 million for fence repairs over the next 30 years. This new program shares the cost between reserve funds and the operating budget. It’s the most cost effective and desirable way to maintain the fence for the life of the homeowners association. The association will put out a secondary bidding process in the future to account for up-to-date considerations and cost changes.

The new fence maintenance program addresses several major issues that the association had been facing. First, the program allows for improved service to residents by greatly reducing the need for delayed emergency repairs. Next, the program will save the association more than $500,000 in maintenance costs over 30 years. Finally, by allocating fence repair and maintenance costs to both operating and reserve funds, rather than the previous reserve funded-only “major component and repair” line item, this approach has raised the association’s reserve funding level more than 30 percent.