Planning for future repairs and maintenance costs of common areas in the homeowner’s association is one of the most important jobs of an HOA board – and also one of the most neglected. Sometimes, boards are just short-sighted, focusing on the essentials that need to be done in the association now. While today is important, tomorrow must not be forgotten.
One issue that makes it difficult for boards to plan for the reserves is the pushback they receive from current homeowners because they have a hard time seeing how assessments for future projects will benefit them now. Learn how a reserve study protects owner value for both future and current homeowners in the association in the article excerpt below.
Posted by: Kevin M. Leonard, RS
How a Reserve Study Protects Owner Value
A Well-Managed Reserve Fund Benefits Future and Current Owners
A well-managed Reserve Fund obviously benefits future owners. Less obviously, current owners benefit as well.
A Reserve Study helps boards explain how a sound plan for maintaining or refreshing common property benefits all owners right away, as well as in the long run. As soon as their Association receives and begins to implement the Reserve Study report, current member-owners benefit in several ways:
Reduced conflict. Assessments based on a Reserve Study are founded on hard facts and objective analysis. Owners may still disagree about how quickly to top up their Reserve Fund, but with the report in hand, discussion can proceed from a baseline of accepted facts.
Predictable costs. Without a Reserve Study, owners never know when the next maintenance surprise will bring about a sudden Special Assessment. Once leaders start to act on the Reserve Plan, owners know what to expect, and develop confidence in their Manager and Board.
Enhanced resale values. Savvy buyers take Association fees into account when they decide how much to offer for a unit. One of the most frequent objections selling agents hear from prospects is, “How do I know fees won’t go up after I buy?” A professionally-written Reserve Study is the best response to this concern, because it provides exactly the disclosure buyers are entitled to and the assurance they need.
In all these ways, the current owners benefit from a Reserve Study right away. To maximize these short-term benefits, the Board needs to communicate effectively with owners as soon as it receives its Reserve Study report.
As the old adage says, if you fail to plan, you plan to fail. Waiting for emergencies to happen will only result in crisis and surprise extra costs to members of the association – all because a board chose not to take leadership.
It’s the responsibility of the HOA board to protect, maintain and enhance the homeowner’s association. Conducting a reserve study and planning for the reserves shows that the board is fulfilling its responsibilities and positioning itself as strong leadership for the association.