capital items replaced over several years

Most of these are questions you should ask your reserve study specialist. Start with whoever did the last one and review that study to see how this was addressed. If you've never done one before, make sure to make this a priority in deciding what you will do going forward.

I would think if you have, say, 100 fences and 16 were replaced the last time you did a reserve study (let’s use 2010 as an example) and they have an estimated useful life of 25 years, those 16 would be replaced in 2035. If you replace the others at various times after 2010 and they also have a useful life of 25 years, you count from the point they were replaced, as in:

Number of fences replaced in estimated replacement date

22 2012 2037
25 2013 2038
20 2014 2039
17 2017 2042

You could keep things simple by replacing the rest at the same time so they all have the same estimated useful life and reserve deposits will be estimated accordingly, but if some are in relatively good shape, I understand keeping them as is to maximize the useful life. Reserve money should only be used for reserve components, so if fences are a reserve component, use that money accordingly and the non-reserved projects should come out of the operating budget.

You said your reserve studies listed patio fences as a capital component, but what do your documents say? If that's where that information came from, replacement should be covered by reserves. Periodic maintenance, such as painting could come out of reserves, but if it's something done annually, it's probably best to put that in the operating budget. I would do a detailed analysis of the operating budget to see what's being going up or way up over the last five years to identify trends and determine what can be reduced or cut. That could help you decide how annual maintenance projects will be handled and when they should be done.

If you want to make individual homeowners responsible for patio fences (as they are in my community), you’ll have to get everyone to agree to amend the documents accordingly. Perhaps the association would do one massive replacement and then tell everyone future maintenance and repairs is on them. In fact, I believe moving something from association responsibility to homeowner responsibility or reverse requires amending the documents – which requires homeowner approval.

Rats, that didn't work either - the way this should read is - if you replace 22 fences in 2012, the estimated replacement date would be 2037 if they have a useful life of 25 years. Do the same with the rest of those numbers.

My HOA was started in 2007, the last home sold in 2013; in 2014 the BOD began with immediately spending a ton of money replacing the street lights. Then a major pool resurfacing in 2015 costing $20,000. Then another 20 large was dumped in the park which was a failure. The BOD hired a pool servicing company that ruined the hot tub because the plaster is chipping away, they let the tub sit empty last year when it was 110 outside. The landscaping in the park was supposed to put in sprinklers for the lawn instead of the drip under sod watering system that it still has. And earlier this year my HOA spent 100 large on asphalt resurfacing which should have been done and paid for by the developer because their construction trucks destroyed the streets. This new foo foo surface looks horrible with tire marks through it.

Seems like some HOA follow the reserve study just to sped money regardless if the repair is needed. So yes or HOA can spend the money.

You asked what I recommend. Since fences can be costly and will require periodic maintenance (cleaning, painting), repair (replace broken pickets/posts) and full replacement at some point, I would prefer to consider them reserve items. This way, the membership can avoid a special assessment or deferment when the fence needs replaced.

Having said that, what capital components are included within a reserve study is up to the Board.


Same way you would handle any other capital component.

To learn more about reserve studies (and how to do them) see the following thread on this forum:

Subject: Reserve Studies/Funds 101
http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/103517/view/topic/Default.aspx


This would depend on the type of fence and what type of wear due to use or environmental factors come into play and, of course, the size of your budget.

Example: I might account for painting, repairs and replacement in the reserves OR I might simply account for replacement in the reserves and fund the painting and repairs as needed from the operational maintenance budget.

Hi all,

Thanks for all the great responses! I had hoped to respond sooner but, you know, life.

@SheilaH: I am planning to talk to a reserve study specialist when we do our next study, I just wanted to be well-armed going into that discussion. Our prior reserve studies never really dealt with this. Some of our decks have been replaced but they were all still listed as one reserve component with one projected replacement date. I did think about breaking components up into different tranches with different replacement dates (as you showed) but this seems like something that could get overly complicated really fast.

@KerryL1: You're right, I've been a little sloppy with my terminology. I used the word "capital" for both expenses and reserve component because that's the term used by our property manager. But yes, capital expenses and reserve components are different things. And you're right, maintenance budget => operating budget.

@JanetB2: I don't know if that kind of detail makes sense to keep. For instance, about 1/6 of one of a particular patio fence was replaced because of rot. I don't relish the idea of trying to track that kind of detail.

@DavidW5: We have used the component method for prior reserve studies. I'm thinking that the two methodologies could be combined. Essentially, for components with recurring costs, you just assume that you need a certain amount of money in your reserves to cover replacement of a certain portion every year. When a new study is done, the overall state of repair could be assessed to determine if what is reserved is reasonable. I don't know if you've ever heard of such a thing. I'm just spitballing I guess.

Thanks again for all your help everyone, it's nice to be able to hear what others' experience is!

Jon