Reserve Studies [was HOA Dues Consultants...]
From: Sharon Villines (sharonsharonvillines.com)
Date: Sat, 5 Aug 2006 06:50:36 -0700 (PDT)

On Aug 4, 2006, at 9:49 AM, Marcy, Robert, Nathan & Buddy wrote:

   Our cohousing community (CoHo Cohousing, Corvallis, OR) will be
breaking ground in the next month or two and we are currently going through operation & maintinance/reserve study exercise to determing how much HOA
dues will be.

You are so smart to begin this process now. Unless you have professional people like Robert at Eno Common mentions ( Jessie who works at HUD and Laura who works at Self-Help Bank), you need a professional reserve study company to do a study. The Communities Association Institute is the best source of a qualified company in your area. Beginning during construction is considered a best practice for developers so you are right on target to begin thinking about this.

The purpose of establishing a reserve fund is so that the people who are currently living in a condominium are paying for the replacement of the common elements that they are using now but that will be replaced when they may be gone. If those reserves are not present, the cost of the new roof, for example, will fall all at once on the owners at the time you have to replace the roof. A reserve study is done to determine prudent savings so the cost of the roof is sitting in the bank when it is needed and no one gets hit with a $10,000 assessment.

The more common elements it has, the more the community will need to have in reserve. Site development models, where only the roads and the commonhouse may be owned in common need far fewer reserves than a multi-dwelling building where the entire building is held in common. We have 43 units under one roof, for example. If we have done our homework well, in thirty years, we can replace it at no extra expense or hardship for any household.

There are also different theories about what should be included in the reserves study. Our first study only included things that would expire in 30 years. The study we are having done now will include everything, prorated over the life of the building. Some people exclude items that cost less than a certain amount -- $500 or $1,000 but that can be a game and deceptive. How much things cost can depend on how you count. You can count each roofing tile and thus exclude all of them since each one costs under $500. Better to determine what is a common element and what is not and include all common elements.

Reserve Studies are also worth far more than determining how much you need to put away in savings. In the process of having the study done, you can learn about your facilities from architects, engineers, and building construction experts. The people who are doing our current study are really fanatics about buildings. When they came last week to look at our roof, I learned more about roofs and roofing, and our roof in particular, than I ever thought I could learn in half an hour. They looked at every square foot of the roof, marked off on a copy of our site plan where the bad shingles are, told me what might have caused damage, and explained what should be done during maintenance every 5-6 years.

Since they won't be doing the work, they are probably more reliable than a bid from someone who wants to do the easy cheap stuff and not really do a good job, or someone who sounds too expensive but is in fact telling us what we should be doing and paying for. The reserve study people are independent confirmation.

They told us things like we will need to do gutter cleaning more often because our roof is now 6 years old and the particles are beginning to fall off and will cause sludge in the gutters. We have never had our gutters cleaned because there are no trees up there. Now we know there is another reason. They found CDs in the gutters which they warned us are the perfect size to lodge in the gutters and cause back ups. Not a good way to entertain the kids -- letting them play with AOL disks like frizzbies. Since our roofs are three and four stories up, this is not something we would have known.

A million little things like that. Always walk around with them when they are on site. They are invaluable resources. In DC, our study is costing $5,000 and includes both a reserve and maintenance study. They recommend a paper review yearly, and a site visit again in 5 years. Since they will have done a full study, they won't have to remeasure the next time so it should be less expensive. They have solved so many facilities related problems for us just on the walk-through that the study is already worth every cent. The cost of the reserve studies is included in the reserve fund savings.

They also told us stuff about energy savings and better materials to use. They noted the heat coming off the dryer in the laundry room and told us how to build a closet for the dryers and vent it to the outside. They solved an air conditioning and ventilation problem in the guest rooms that had stumped everyone else. It isn't just about the savings account.

The reserve study report includes a listing of every common element -- everything used to build or furnish the property. How much it cost new (in round numbers estimated), how old it is, its expected life span, and how much it will cost to replace. Replacement costs include calculations for inflation and interest earned on the account. We have asked for ours in a spreadsheet as well as paper copy so we will have the raw numbers to play with and to update. We've had to replace sump pumps much more frequently than our last study suggested, for example. Using the spreadsheet is both a place to keep track of that info and to see if our budgeting is on target.

If you have a good company in your area, the reserve study (a much maligned beast) can be your best tool for maintaining your facilities. It isn't about sitting down with a calculator -- it's about understanding how your building is constructed and what it will take in the future to replace it. You are protecting the roof over your head, your collective heads.

Sharon
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Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org


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