1. Review the Study for Accuracy and Omissions.
Your Reserve Analyst has utilized all of the information obtained in the due diligence phase of creating the reserve study. It is important the Association review the reserve study to verify, most importantly, that the study indicates the correct number of dues paying members, that all relevant common components are included, that current reserve balances are correctly reported and that interest rates are realistic and in line with actual interest rates earned on reserve accounts.
A review of each component is also recommended to verify that the estimated economic life expectancies are realistic and cost data is in line with contractor bids, when available. This is especially important with large expense items such as roofs and siding, as inaccurate cost estimates can have a serious impact on future funding levels.
If you disagree with any of the reported items in the study, call the Reserve Analyst and discuss with them their logic for the position taken in the study and why you feel it may not accurately reflect your Association's circumstances. There may be a good reason for the difference in opinion and when discussed, all parties can come to an understanding of why the report was completed in a certain manner. If there is an item that needs addressing, the Reserve Analyst will be helpful in getting it revised.
There can also be discrepancies in how an Association's governing documents are interpreted. A common example of this is:
Exterior windows in the governing documents may indicate the inclusion of the exteriors of the building(s) as one of the common components but there is no specific mention of windows. Some associations interpret this as to include the whole window, others include just the frame of the window and some just ignore the item altogether. A recently completed reserve study for an association in Bellevue revealed the association had not been funding for exterior windows, but a review of the governing documents clearly showed they were to be included as a reserve component. It was discovered the association had been following a different association's governing documents for the better part of 15 years. Now that was quite a discovery for us and a shock for them.
When this type of issue arises we do our best to accurately interpret the governing documents and review the Association's policy from inception.
Crescent Reserve Studies standard policy is to provide our clients with a draft of the final reserve study for review. This helps to ensure that the final product that is delivered to the Association and its members is accurate and thorough.
2. Implement the Study into the Association's Financial Plan
Your Association can follow all required guidelines to ensure adequate funding levels, but without utilizing the reserve study as a tool in the overall Association's financial plan, little change will be made to the Association's reserve levels. This is often the most difficult step in the process as difficult decisions will need to be made. This may include increasing monthly dues or special assessments.
Expected component replacement/repair can also be implemented into the Association's long term planning when the reserve study is reviewed annually. Large expense items can be forecast, often well in advance, to minimize special assessments, even for associations with low reserve levels. For example:
Our Seattle reserve studies will often include a schedule of exterior paint and roof replacement so that the building exteriors are adequately protected against the abundant rain and drizzle that the Pacific Northwest is accustomed to. By reviewing this schedule, the Association will be adequately prepared for these expenses and will be able to implement the appropriate dues levels for its members.
3. Disseminate the Reserve Study
Nothing is worse for Association Members than not knowing. Providing a copy of the reserve study or at least parts of it, such as graphs and funding levels to its members, helps to ensure that the Association and its members are all informed of current and future funding levels. When dues need to be increased or a special assessment must be imposed it is best for everyone to know when and why this will happen. Associations have a fiduciary responsibility to adequately plan for expenses and its members have the same responsibility to their families own personal financial planning. A clear example of this is listed below:
A Seattle reserve study completed by one of our Reserve Analysts was not distributed to Association Members. It was a shock to some of the members who were selling their units that large special assessments were planned. Potential buyers were able to obtain this information by reviewing the reserve study. This had profound effects on the marketability of the units.
This article hasn't been commented yet.
Plants are shaped by cultivation and men by education. .. We are born weak, we need strength; we are born totally unprovided, we need aid; we are born stupid, we need judgment. Everything we do not have at our birth and which we need when we are grown is given us by education.
(Jean Jacques Rousseau, Emile, On Philosophy of Education)
Write a comment
* = required field