I have been lucky enough to have seen the reserve study industry mature and grow over the last fifteen years. Aside from the technological advances in how Reserve Specialists analyze the physical and financial aspects of a community, there has been a monumental shift in the legislation surrounding reserve studies and their use in community associations. In the last couple of years, a number of states have mandated and encouraged associations to regularly review and undertake a reserve study. Whether it be the recent legislative changes in Washington State or Utah, the prevailing belief is that reserve studies help Associations actively prepare for the long-term and avoid special assessments.
Although for all the forward progress we have experienced, it still feels that we have a long way to go. The journey is still very much in front of us. Large numbers of HOA and condominium associations around the country remain in denial or are oblivious to the fact that they are unprepared and, in some cases, underfunded. Many communities have defaulted to the belief that they will reactively address ‘issues’ as they arise. Unfortunately, the vast major of communities who work reactively will at some stage need to finance necessary and anticipated expenses via special assessment.
From my experience, communities that don’t have a reserve study can be categorized as either ‘don’t know’ or ‘don’t want to know’. The ‘don’t know’ communities are simply unaware of the need and benefit of a reserve study in their planning and budgeting process. The ‘don’t want to know’ communities are aware but hesitant or resistant to get a reserve study.
There are many reasons why an association would not want to have a reserve study. One major issue is fear. Many HOA and condominium associations are just not willing or ready to hear about the reality of their financial situation. Many fear that a reserve study will lead to increased dues, expenses or financial hardship for members. Others fear that the study will impact upon real estate prices and could deter people from buying into their community. In both cases there is already an underlying belief that the association’s financial situation is not sustainable or where it should be. Funnily enough, the reserve study doesn’t create the problem and is actually the solution. The reserve study provides the answers, insight and understanding an Association needs to take action before they are forced to do so.
Education and awareness are the main drivers. As more Associations start to hear about the benefits of having a current reserve study on file.
I recommend you take the time to talk to a Reserve Specialist about your Association. A conversation is free and will invariably provide you with insight in relation to how you view your community and the assets you manage. Ask for bid, which is also free, and gauge the cost-benefit of performing a reserve study for your community. Take five minutes to get the answers to your questions and realize that a reserve study is a tool that will ultimately benefit your association and not hinder it.
When is the right time to do a reserve study?
There is never a wrong time to undertake a reserve study, there is however a right time to get one done. With good planning and a little effort, associations can get the most of out their reserve study experience. Understanding the seasonal work flows of professionals in the reserve study industry will help associations understand when the time is right.
Why is a special assessment so special?
There is nothing special about a special assessment. Special assessments are an end on to themselves. Special assessments are the last resort of an association that does not have the means or the money to do what is needed. Taking the time to understand the process and journey toward a special assessment will give some perspective to many associations already on the path themselves.
Limited funds, limited time, and a reserve study.
Most associations face situations where they feel that they are not adequately prepared to address a repair, replacement or major maintenance project. Whether they are financially or psychologically overwhelmed, HOA and condominium associations need to realize that there are many ways to get a job done.
Reserve studies, interest and investments.
Associations have many ways in which they can create wealth. Above and beyond the monthly or annual homeowner dues, there are other ways in which associations can generate income.