As reserve study professionals we encounter all kinds of scenarios related to repair and replacement issues. Roofing, siding, windows and asphalt are all common area components which often have install issues or environmental factors which were not anticipated when the building was constructed. This can lead to a much lower useful life of these components that are unfortunately not typically readily apparent for the first 5-10 years of the components life. So how do we go about funding for components which do appear to have some issue impacting their useful life?
Conduct Invasive Testing
Once a community is aware of issues related to common area components (e.g. siding not installed with necessary breathability or waterproofing or natural springs under asphalt roads) we recommend first hiring licensed and qualified vendors to complete invasive testing of the components and underlying structure or surfaces. This invasive testing will help to clarify what the cause and scope of the issue is so that appropriate bids can be obtained to rectify the issue. We have seen what appeared to be minimal siding issues grow to dry rot issues and large scale repairs required throughout a community, all of which were not apparent just from the visual site inspection of the components as is completed for the reserve study.
Obtain Multiple Bids
Obtain as many bids as possible for large projects as the bid numbers will usually be wide ranging. A Board can then determine who has conducted their due diligence in providing these bids (examined testing results, reviewed building/site plans or conducted their own measurements) and utilize them for the completed work.
Incorporate the Results into the Reserve Study
Depending on how the issue is handled and paid for the Association should then update their reserve study accordingly. Perhaps the repairs will be paid from a special assessment, an insurance claim via litigation, a bank loan or the community may decide to increase dues and put off the project for a number of years to build up reserves. Each will require the replacement costs and timeframe to be updated in the reserve study so that the route the Association decides to follow can be adequately funded for in the reserve study.
It is important to note that the Associations / Community make the decision on how to proceed with large scale repair projects. Vendors will usually provide several repair and / or replacement options with different associated costs. The reserve analyst is not one to make decisions for the community, Association or Board as the money in the reserve account belongs solely to the community who has entrusted a Board to make these difficult decisions. Reserve study companies provide a report that is a budgeting tool which does not have to be followed and is not shared (by the reserve study company) with third parties such as vendors, governmental agencies or lenders.
