LmT (California)
Posts: 237
Posts: 237
Posted:
We have a line on our reserve study for Landscape. Would the removal and replacement of a tree be an allowable reserve expense?
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Allowable Reserve Expenses
Started by LmT • 6 replies • 383 views
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ElleN (Idaho)
Posts: 4,420
Posts: 4,420
Posted:
Quote:
Posted By LmT on 10/25/2023 12:31 PM
We have a line on our reserve study for Landscape. Would the removal and replacement of a tree be an allowable reserve expense?
We have a line on our reserve study for Landscape. Would the removal and replacement of a tree be an allowable reserve expense?
LoriM15 (Florida)
Posts: 1,009
Posts: 1,009
Posted:
Funny that you ask this question today. Our treasurer just sent me an article about what you can use reserves for. Some people have a philosphy that unless it's a line item on the reserve, you can't use funds. However, the article he sent says this:
Can I Pay For This From Reserves? I Association Reserves https: //www.reservestudy.com/resource/article/can-i-pay-for«this ...
2 of 4
While it may be simple to rely on the Component List to determine if an expense should be paid from Reserves or
not , the higher authority is actually National Reserve Study Standards. National Reserve Study Standards are the
ultimate authority on the appropriate use of Reserve Funds and contain a simple four-part test:
According to National Reserve Study Standards, only components that pass all
4 parts of the 4-part test are eligible for Reserve Funding:
• Is it a common area maintenance responsibility?
• Is it life limited?
• Does it have a predictable Remaining Useful Life?
• Is its cost above a minimum threshold of significance?
If the project passes the test, but does not currently appear in your Reserve
Component List, it is appropriate to spend the cash from Reserves, and then to add the component to the Reserve
Study during the next update.
This is of interest in our community because we do not have landscaping on our reserve study, but it does have useful life and we are pretty far past that in a lot of areas. So we are using reserve funds for some replacement of landscaping.
Can I Pay For This From Reserves? I Association Reserves https: //www.reservestudy.com/resource/article/can-i-pay-for«this ...
2 of 4
While it may be simple to rely on the Component List to determine if an expense should be paid from Reserves or
not , the higher authority is actually National Reserve Study Standards. National Reserve Study Standards are the
ultimate authority on the appropriate use of Reserve Funds and contain a simple four-part test:
According to National Reserve Study Standards, only components that pass all
4 parts of the 4-part test are eligible for Reserve Funding:
• Is it a common area maintenance responsibility?
• Is it life limited?
• Does it have a predictable Remaining Useful Life?
• Is its cost above a minimum threshold of significance?
If the project passes the test, but does not currently appear in your Reserve
Component List, it is appropriate to spend the cash from Reserves, and then to add the component to the Reserve
Study during the next update.
This is of interest in our community because we do not have landscaping on our reserve study, but it does have useful life and we are pretty far past that in a lot of areas. So we are using reserve funds for some replacement of landscaping.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
The OP said they do have a reserve line item for Landscaping. I say removal and replacement of a tree falls under this line item.
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
Removal and replacement - especially the replacement - is easily justifiable. It's even better if your operations budget could cover the cost and preserve the Reserve a bit more.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
Yes, LmT, as some others agree, I too think you may use reserves to remove that tree. I've seen reserves t studies from 5 different firms for our complicated HOA, but not every tree or tree type is listed.
Components that ARE listed are specifically pieces of equipments, machinery, pumps, motors, elevators, etc. But, for example, we have many lineal feet of powder coated metal in our common areas, and not every gate is listed in the study. Quantities for such are usually listed by lineal feet, square feet or yards, of sheer numbers, e.g., our residential (high rise) windows contain nearly 7,000 panes of glass.
Lori, can you tell us the date of the report your treasurer gave you? There is a new 20 page report backed by CAI on reserves with some changes. a major one os that now components that have a lifespan of over 30 years should be listed in the study. The component doesn't require contributions towards it until it has 30 years remaining life.
Components that ARE listed are specifically pieces of equipments, machinery, pumps, motors, elevators, etc. But, for example, we have many lineal feet of powder coated metal in our common areas, and not every gate is listed in the study. Quantities for such are usually listed by lineal feet, square feet or yards, of sheer numbers, e.g., our residential (high rise) windows contain nearly 7,000 panes of glass.
Lori, can you tell us the date of the report your treasurer gave you? There is a new 20 page report backed by CAI on reserves with some changes. a major one os that now components that have a lifespan of over 30 years should be listed in the study. The component doesn't require contributions towards it until it has 30 years remaining life.
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
There are new "standards" for USA HOA reserve studies prepared by an expert task force. See a quick summary:
https://www.davis-stirling.com/Newsletters/2023-Newsletters/New-Reserve-Study-Standards
To review the entire 20-page new document see:
https://www.caionline.org/LearningCenter/credentials/Documents/CAI Reserve Study Standards July 2023 - FINAL.pdf
Please note that the recommendations are not a law or a statute. But your reserve specialists is likely to follow this document. You specialist, if stationed locally, will know if any of it is contradicted by your state's statutes.
I read the 2016 report that Lori contributed, and don't think any new standards conflict with Norlund's useful essay.
Notably, having a Maintenance manual for your HOA's common areas' components is strongly recommended. I advised the OP of this post to review theirs re: a different topic. Our was updated in 2018 and is very helpful to our board, PM and reserve specialist.
https://www.davis-stirling.com/Newsletters/2023-Newsletters/New-Reserve-Study-Standards
To review the entire 20-page new document see:
https://www.caionline.org/LearningCenter/credentials/Documents/CAI Reserve Study Standards July 2023 - FINAL.pdf
Please note that the recommendations are not a law or a statute. But your reserve specialists is likely to follow this document. You specialist, if stationed locally, will know if any of it is contradicted by your state's statutes.
I read the 2016 report that Lori contributed, and don't think any new standards conflict with Norlund's useful essay.
Notably, having a Maintenance manual for your HOA's common areas' components is strongly recommended. I advised the OP of this post to review theirs re: a different topic. Our was updated in 2018 and is very helpful to our board, PM and reserve specialist.
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