Future roofing cost issue

Started by RobertW31 • 6 replies • 336 views

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RobertW31 (New York)
Posts: 41

Posted:

First off in presenting this issue I already know I will have to consult our attorney and follow the by-laws for any changes so I am not looking for that advice on that but really a suggested structure based on experience.

We are a 110 unit Town House community where the units and the lots are owned by each resident. The HOA fee includes future roofing costs since we have already replaced all roofs in the development one time with no extra cost to the homeowners.

This has to change with the next cycle of roofing that will start in about 10 years and normally takes about 8 years to replace all the roofs. The cost doing a rough estimate will be enormous and not anything we could reasonably be including in the HOA fee.

It is clear that residents will have to pay for their own roof costs or at least part of it when the time comes.

The portion that is in the reserve for roofing costs is really attached to the units. In other words because of the turnover in owners it is not something owned by the property owner.

So I'll use an example.

Let's say that the current reserve in the budget has $200,000 which would be use for roof replacement.

If you do the math that total divided by the 110 units gives $1818 per unit for roof replacement.

The questions are: Do we tell the residents that they will have to pay part of the cost of future roofing and give them the option
through a community wide vote of continuing to add to the roofing reserve thru the HOA fee/ or reduce the HOA fee by eliminating the portion for roofing? I kind of feel we need to tell them about the issue but continue the roofing assessment but looking for opinions.

There may be other options that I am not thinking of but I will not be President of the HOA when this issue is upon the group but I feel it really needs to be addressed now instead of kicking it down the road.

CathyA3 (Ohio)
Posts: 6,299

Posted:

To be clear, if the HOA pays for roofing costs, the homeowners *are* paying for it.

Your CC&Rs will probably dictate who owns the roofs (unit owners vs. association) and who is responsible for replacements. If they do spell this out, then that's what the association has to do - it's not up for negotiation unless you amend you CC&Rs (requires approval of a majority of owners, and probably a super-majority of 67% or 75%).

I'll assume that the roofs are association responsibility. It sounds like your reserves are actually underfunded, which means an assessment increase is needed. In fact you should consider a new reserve study since your last one probably understated the inflation rate.

The best way to sell this to the owners is pointing out that associations can often get better pricing than individual owners, so this will save them money. But they will have to bite the bullet unless they want to deal with piecemeal repair costs (which will increase overall costs since the roofs will still need to be replaced) and possible water damage and mold issues in the units (which is likely homeowner responsibility to fix).

Lay it all out and compare the costs of the various options. Saving up the money ahead of time and paying for replacements as needed will very likely be the lowest cost option.

Are there any limits to the board's ability to increase assessments? Do you need to get homeowner approval at some point, or is the board in control? Does it matter whether this is a regular assessment or a special assessment?

AugustinD
Posts: 3,698

Posted:

RobertW31,

First, if the covenants say the HOA is responsible for maintenance of the roofing, then the HOA is obliged to include the roofing in reserve studies and contribute to the reserve account monthly, pursuant to the reserve study.

Second, if anyone does not like this, then she or he can follow the steps for amending the Declaration and removing the roofing as a reserve component that the HOA maintains.

Third, there are perils to removing the roofs as a reserve component that the HOA maintains. First peril: People will go cheap and let the roofs fall into great disrepair, resulting in unattractive homes et cetera, with leaks potentially affecting adjoining homes.

Fourth, the owners will have to pay for new roofing regardless of whether the roofs are a reserve component or not. The mechanism for paying will be: either (1) Prudent setting of the regular assessment starting immediately so the HOA can save up for roofs; (2) a Special Assessment (which is not as fair as (1); (3) a combination of (1) and (2); or (4) the HOA takes out a loan (which I personally loathe).

SheliaH (Indiana)
Posts: 6,964

Posted:

I don't hear anything about a reserve study - if it's been five years since the last one, get one done THIS YEAR so you'll have a better idea of what you're working with. I also live in a townhouse community and you need to be doing these on a regular basis so the money's there and you can avoid special assessments or loans or REALLY HIGH assessment increases when the time comes.
If you get a reserve study, you could ask the specialist to come to a special homeowners meeting where he or she can discuss the study and its findings, along with the impact on homeowners.

Bottom line, assessments have to be increased steadily so you can fund reserves properly and you still have to think of other parts of the common area beside the roof. You shouldn't have to spend ALL the reserve funds on roofing - how will you fix the streets, sidewalks, parking lots, or whatever else you have? Homeowners can't depend on moving out (or taking a dirt nap) 8 years from now and they always forget inflation, so the $1818 quote could easily be more and the work may need to be done within the next five years. Will they have $2K or more to cough up when the time comes because they'd rather keep assessments "low?"

The specialist doesn't have a dog in this fight - all he/she does is run the numbers, so news like this can sound better because he/she is more objective. Once people know what's at stake, they might calm down. And if not, remind them of Surfside - people squawked about high assessments and special assessments there as well - how did THAT work out for them?

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

JohnC46 (South Carolina)
Posts: 14,265

Posted:

We are 40 duplexes and 32 single family homes. It is in our Covenants that the HOA will pay for roof and siding replacement based on normal wear and tear. The Declarant and a roof replacement study warned us that dues were not high enough to pay for such and after turnover this became a major issue for us. We discussed, debated, explored alternatives (cost sharing was one), we beat it to death. We knew to change the Covenant we need 2/3rds of ALL OWNERS to approve. In several straw polls, discussion meetings, etc. it was obvious no amendment would pass. Many said one reason they bought here was roof/siding replacement was included.

We sent out an informational letter to all owners, including spreadsheets to show what we were up against. Then the BOD bit the bullet and raised dues 40% with the increase earmarked/dedicated to roof replacement only. Surprisingly, few openly objected.

MarkM19 (Texas)
Posts: 1,459

Posted:

Robert,
Hard to top the great advice all of these long-time posters have already given you. My only thoughts are the job of the HOA board is to plan for the future and the reserves is the ONLY way to do that in small doses. If you ask 110 owners to write you a check for $1800.00 you will have a revolt. If you raise the dues by $20.00 monthly it is a forced savings account that will become unnoticeable to many owners. The ones that can't afford it probably should not be living in an HOA. You can bet if they can't afford the 20 bucks, they won't be saving for the eventual replacement either.

I have found over my 12 years on HOA boards 95% of owners know very little about how Reserves work. I think every household would be better served if they were put in place by families.

KerryL1 (California)
Posts: 14,550

Posted:

Agree with Mark. fine responses here.

Echoing Shelia, if your HOA hasn't had a reserve study in three years, get one done. Your certified reserve analyst /specialist will give you the best estimates about the cost to replace. Then raise your dues accordingly. You might not want to raise them to get your HOA 70-100% funded next year, but get yourselves on path towards that goal over perhaps several years.

You mention, Robert, that your bylaws are in play here. But usually they don't deal with reserves components and who pays. So, It's probably in tyour CC&Rs.

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