Transition - Engineering & Reserve Studies

Started by MaureenM1 • 4 replies • 1769 views

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MaureenM1 (PA)
Posts: 344

Posted:

Our development is in the process of transition from the developer/builder (same person). I am the President of the current five member board (all residents). We are 40 townhomes.

I am in favor of having an independent engineering study be done for our development before the development is turned over to the HOA. Some of the board members feel that the township's engineer would do a thorough inspection before releasing the bond to the developer and think we should not spend the money on our own study. I disagree and feel we need an INDEPENDENT study.

One of the board members is a Financial Analyst for a major corporation and feels he can do the Reserve Study for our development and can save the HOA the cost of hiring a company to one for us.

Any advice on this would be greatly appreciate. We are having a board meeting next Thursday and I would like to get your feedback before then.

thanks,
M

JohnC46 (South Carolina)
Posts: 14,265

Posted:

It seems to me you want two things done:

1. An engineering/inspection study to be sure all is as expected sort of like a home inspection. How man amenities do you have like pools, tennis, etc. versus homes alone? How many other things like storm drainage, streets, etc.? The more complex the situation, the more the need for a qualified engineering inspection. Do you not trust the Township engineer and/or the developer/builder?

2. Reserve study. Well the more complex the development is and the more long range maintenance items (pools, tennis courts, parks, etc.) the more prone I would be to have a professional reserves study done. If 40 townhomes with few amenities the more I think experienced homeowners could do the reserve study and forecast.

My summary. The more complex your situation, environ, elements, etc., the more professional help might be needed. If 40 townhomes with the main issues being landscaping and maintenance of just the 40 townhomes, then the less of a need for professional help.

DavidW5 (North Carolina)
Posts: 565

Posted:

Maureen,

The county inspectors will only cite code violations relative to bond releases. There are many types of construction defects that you would want the developer to either fix or compensate the HOA for which are not code violations. I recommend that you spend the $ now for an independent engineering study rather than later when you discover a problem that went unnoticed by the county inspectors. In many states there is a statute of limitations so I would not delay getting the engineering study done.

As far as doing your own reserve study - if you do not have extensive common elements to maintain, it is possible to have an owner who is financially astute do a reserve study. However, I would recommend that you have a professional engineer do the first study to insure that your do not overlook any elements that should be included and to get a baseline in place. Then, in subsequent years, an update of that study by a owner may be feasible.

HeleneN (Connecticut)
Posts: 84

Posted:

Maureen

DavidW gave you some good advice! 7 years ago in preparation for the turnover of our (under 70 units) from the developer, the board sent the release agreement to the board's attorney to be sure everything was in order. Though the agreement was in order the attorney advised the board to have an independant engineer inspect the property before we signed the release. The board opted out of taking the attorney's advice because of the expense and the fact that we didn't have any amenities. Here we are 7 years later with drainage problems that could get ugly and costly. You know the old adage, "penny wise and pound foolish"? Stick to your convictions and good luck!

CarolR11 (Colorado)
Posts: 2,563

Posted:

Maureen, Do follow David's advice and hire an independent engineer. Some statutes of limitations in some states "run" in just thee years so you need to know as soon as possible whether there are construction defects.

One question is: What kind of engineer? For our litigation against the developer, our defect attorneys hired two kinds--a mechanical plumbing engineer (we're a high rise) , and another who specializes in concrete we have underground garages), drainage, etc.

I also agree with David that you should hire a reserve specialist to make sure that no elements of your development are overlooked. Our first reserve study was done by the developer and "his people," who underestimated the estimated lifespan and cost of replacement for some items. There were a few that were overlooked as well.

I'm a little surprised that a Reserve Study hasn't already been done. How, for example, could the developer set annual dues without a Reserve Study?

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