CA Reserve Studies - long life components

Started by SusanO3 • 8 replies • 224 views

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SusanO3 (California)
Posts: 163

Posted:

We have a concrete mission style roof on our 95 townhomes. In 2022 the reserve study said the roof tile had a RL of 36 years, but for the first time the cost of replacing the tile was included in our Calculation of Percent Funded, even though the replacement did not appear in our 30 year plan. As a result we went from 60% funded to 33%. Has anyone had this happen in their HOA? Sue

KerryL1 (California)
Posts: 14,550

Posted:

I think your '22 Study says the tiles have a "Remaining Useful Life" (RUL) of 36 years? How old are these roofs? What's the name of the document you're calling your "30 year plan?"

In recent times, reserve study providers have been listing components in the reserve study that have a RUL over 30 years. We have a couple, newly listed in our '24 Study" "Generator/Switch Gear, Refurb/Replace," UL 50 years; RUL31 years, $450,000. "Plumbing Insp." (of huge drain pipes). UL, 50 years; RUL ) 0 years, $40,000.

So, if I understand the question, yes. Even if a component for which the HOA is responsible has a Remaining Useful Life (RUL) of over 30 years, the reserve specialist (RS) may include it in the Study so that it doesn't sneak up on HOA boards. It's disheartening to see the % funded drop so much, especially if you feel like your Board has been diligent in raising dues to get funding up to 66%. But your RS, I hope, submitted some options to bolster your % funded. Sometimes, RS's rec, IMO, too drastic an increase in assessments to get your % funded closer to 70%.

BUT, keep in mind that even 30% funded puts your HOA at a "medium" risk of a special assessment. So raising dues in '25 to get you to 40% funded would be good. But that depends on the uniqueness of your HOA and the owners in it.

Call to everyone to read!!! https://www.caionline.org/LearningCenter/credentials/Documents/CAI Reserve Study Standards July 2023 - FINAL.pd. It's 19 pages. This is the latest our on Reserves Studies by experts in the field.

DEFINITION: "Reserve Study: A reserve study is a budget planning tool which identifies the components that a community association is responsible to maintain or replace, the current status of the reserve fund, and a stable and equitable funding plan to offset the anticipated future major common area expenditures. This limited evaluation is conducted for budget and cash flow purposes. Tasks outside the scope of a reserve study include, but are not limited to, design review, construction evaluation, intrusive or destructive testing, preventive maintenance plans, and structural or safety evaluations."

It's important to note that the purpose is NOT to identify the exact physical condition of every component let's say, 96 discrete tile roofs. The study is enacted for "budget and cash flow purposes."

SusanO3 (California)
Posts: 163

Posted:

Thank you, I will read what you recommend. I think the previous President was very upset with o go from 60% to 33%, but at least the reality of the roof tile replacement is incorporated into the Reserve Study for all homeowners to see

SusanO3 (California)
Posts: 163

Posted:

30 year plan is just the spreadsheet we have in our Study that stops at +30 years. “Plan” is not the right word. I think most reserve studies stop at 30 years into the future

KerryL1 (California)
Posts: 14,550

Posted:

Many would be upset to see their % funding drop so much due to kind of a surprise add-on of long-term components. Yes, it's good for owners to see for themselves why dues must be increased.

My HOA had 3 difference reserve sty Judy providers in the 5 years before we hired the firm w'eve now used for several year. In all four cases, the Reserves Specialist was more than willing to make t a Town Hall type presentation to owners at no extra cost.

Great, Susan, that you'll read the important update to reserve studies. It, btw, applies nationally.

SusanO3 (California)
Posts: 163

Posted:

Thanks Kerry, I have the Reserve Specialist doing an Open meeting on August 20, and then, hopefully, the newly educated Board can have a better discussion with Analyst before he puts out the Final Full Reserve Study 2024.

LetA (Nevada)
Posts: 2,679

Posted:

I get the feeling if you follow the reserve study to a T, when that reserve item when it comes up for replacement will not put you
in a bind. In the meantime be budget wise. Watch where you are spending money. If you have any phone lines that are not being used,
cancel the service on them. Look at your monthly expenses, where can you cut the fat? Be honest with the owners, raise assessments
a few dollars and put that money into reserves. If your reserve study calls for your roof replacement in 5 years, put a small percentage
aside in a 5 year CD so you can cash out when the need arises and you will have a little extra coin to play with.

I feel owners will be more receptive now putting a little extra money aside now compared with facing a special assessment
at the time the project needs to be completed.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By LetA on 07/22/2024 9:39 PM
I get the feeling if you follow the reserve study to a T, when that reserve item when it comes up for replacement will not put you
in a bind. In the meantime be budget wise. Watch where you are spending money. If you have any phone lines that are not being used,
cancel the service on them. Look at your monthly expenses, where can you cut the fat? Be honest with the owners, raise assessments
a few dollars and put that money into reserves. If your reserve study calls for your roof replacement in 5 years, put a small percentage
aside in a 5 year CD so you can cash out when the need arises and you will have a little extra coin to play with.

I feel owners will be more receptive now putting a little extra money aside now compared with facing a special assessment
at the time the project needs to be completed.

Good advice.

KerryL1 (California)
Posts: 14,550

Posted:

No c doubt the RS will rec that Susuan's HOA reserves be "fully funded." All 4 of the RSs who analyzed our reserves did! And then, of course, there'd be enough to replace the roofs. But the majority of HOAs--inlcuding min -- do not "fund to the study" i.e., as advised by their RS. Their annual contributions are not adequate to fund the reserves per the rec of the RS. The RS'
rec is, boards feel, too much for many owners to handle.

When the board requests it, the RS will show them different scenarios of annual contributions that will put the HOA on the path to stronger funding.

Ultimately, though, Boards decide how much there'e able to raise dues to get them on a good path without creating too many hardships and perhaps foreclosures among owners.

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