Info on 2023 National Reserve Study Standards

"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 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..."which 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."

Please note, Cathy: a Study identifies the components that a community association is responsible to maintain or replace..." "maintain" in part means repairs.

Many thanks, Tim!

I'm not arguing about that. Of course we need to repair. My concern is what bucket the dollars are coming from.

As I'd said in a different thread, boards may assume that a certain level of repairs (eg, under 10K) will be paid for out of operating funds and the reserve study will be done with this assumption. This is one of the first questions the reserve company will ask the board. But then something breaks in a reserve item, and the board pulls the money out of the reserve account without regard to the actual cost of the repairs.

That's where the reserves start leaking money: the smaller repairs that should be paid for out of operating according to the assumptions of the last reserve study but are paid for out of reserves instead. Those small repairs add up fast.

This happens often enough that reserve studies should just assume all repairs to reserve items are paid for out of reserves. But boards may not like this. It makes their current funding levels look worse and will mean increasing assessments, something the Low Assessments crowd wants to avoid. Much better to do the reserve study with an unrealistic assumption so that everyone can pretend things are hunky dory, right?

The problem isn't whether to repair or not. It's that people mislead themselves about money all*the*freaking*time. For those who are savvy with money, owning in an HOA or COA can be a frustrating experience that is harmful to their financial health. And savvy board members have to deal with the financial holes that the less skilled or less responsible former boards have created.

Cathy wrote: "...boards may assume that a certain level of repairs (eg, under 10K) will be paid for out of operating funds and the reserve study will be done with this assumption. This is one of the first questions the reserve company will ask the board."

Having worked with 3 RS's in addition to our current one, whom we've had for maybe 10 years now, no RS ever asked us that question. They always recommended if a reserve component would be less than 1% of our annual budget, it should be paid for out of our O.B. Note that in these studies, repair or refurbish, etc. IS a reserves component along with "replace." They are separate line items.

So, yes, as Cathy wrote, "..This happens often enough that reserve studies should just assume all repairs to reserve items are paid for out of reserves. But boards may not like this. It makes their current funding levels look worse and will mean increasing assessments, something the Low Assessments crowd wants to avoid."

While it's true that "It makes the "current finding level look worse," (because the total amount needing funding is higher), to ignore that roofs WILL need major fixes before they end their lives, or fencing, or drain piping is foolish. The HOA WILL have to pay for these fixes, or refurbishment or a major part replacement to a cooling towner, etc.

Don't forget when these repairs DO occur, often the RUL is "reset," say from 5 years to 10. This improves the funding %

Heres' a recent example. Our twin towers have granite streetside surfaces. Around our square block are twenty-two 22 y.o art-deco lighting scones about 10 feet above the sidewalk. They really are gorgeous, but the lacy metal aspects to the lighting had become dull and the inside of the frosted glass, stained. The Study said their Est.life was 20 years, so RUL was O. $22,000 to replace.

Instead our Board asked our PM to learn how much it'd take to update them to LED lighting and inquired if our engineers could shine and refurbish the metal and glass in their shop. Yes, it could all be done for $4,500. Turned out great! Yes, paid for from reserves.

So, the RS reset their RUL to 10 years-same cost to replace, making our % funded look better. Light bulb replacement, which, of course, HAD been expensed out of the O.B. also will lessen.

To sum up, if a Board doesn't want to kid itself, it will have 3 sources of paying for certain aspects of reserves components: the OB for maintenance and repair for anything less than x% of an ann. budget. Reserve Study component line items comprising everything that the RS recommends, AND for certain big tic components, an addtional line litem for repair/refurbish.

I gave another example elsewhere. Lobby Remodel, i.e., "replace" everything, 15 years. Diff.line item Lobby-Refurbsh - 8 years-mainly furniture. Replacing light bulbs, door mats tot eh exterior, touch -uppainting, of course, comes from the O.B.