As reserve studies become more common and an understanding of what they are and are not an HOA has to make the decision to move forward and order one for the utilization of their community. This is not always an easy step as the cost of a reserve study, the needed disclosures and documents needed to complete the study can cause some Boards to become concerned as to whether it is the right approach for them. It has been our experience that a Board which makes fiscally wise decisions, is open, honest and forthcoming with the membership of the community is also the one that is typically most successful implementing the long term funding goals of the Board. This benefits the Board members themselves as well as the members of the community (current and future).
A reserve study is an excellent too that will help to open up the financial responsibilities of the Association to the Board itself as well as the membership. Too often we see communities which have never obtained a reserve study due to the fear of the unknown, essentially what they are on the hook for in the long term. It’s very important to note though that just because this fear is present in no way means the actual costs associated with common area replacement expenses are not real.
Are you a Board Member on the fence about obtaining a reserve study? Let me provide a list of the benefits to you and the community below, perhaps you too will see that the benefits far outweigh the any upfront costs or documents retrieval necessary to complete one.
Below is a list of the more common benefits of a reserve study for a home owner's association:
- The Community will be aware of the actual costs that the membership will need to take on
- The Board can follow a financial strategy to help pay for these expenses
- The current or future Board can look into different funding options well in advance of the actual expenses occurring (increase dues, loans, special assessments, etc.)
- Projects can be planned for and membership can be notified of inconveniences (such as swimming pools being closed or roads work)
- Measurements in the reserve study can be utilized for future bid verification from vendors – a potential costs saver
- Minimized risk for special assessments, loans or deferred maintenance when a solid strategy is developed and followed
- A Community will be on the same page as the Board with respects to known costs and the future expectations of the membership
The above list is only a minimal list of the more common benefits of a reserve study. The reserve analyst will require only some very basic financial information and some basic governing documents to complete a reserve study to help place the community on a sound financial path. Still on the fence? Take a peek at some case studies - Reserve Study Case Studies - to see how other communities have benefited in ways that were above and beyond what they had expected.