Collaborating with clients to help sustain the invested value of the condominium communities of New England
What is a Condominium Reserve Study?
Briefly, a Reserve Study:
- Inventories the common area components of your condominium or HOA.
- Determines how well they will continue to perform their designed and specified functions.
- Designs a replacement schedule of when those common area components need to be replaced.
- Looks at the amount you now have in your reserve fund and provides an opinion of how well it will support the replacement schedule.
- Provides a plan for capitalizing the replacement schedule over the next 20 - 30 years in terms of annual contributions to your reserve fund.
- Using this information, you can set the reserve portion of your budget in terms of annual contributions to your condominium reserve fund.
- Provides a narrative report with recommendations for funding strategies to most effectively manage your reserve fund assets.
Functionally,there are two Reserve Studies:
... the perceived market value of the commonly owned investment of unit owners in their properties. As the components that make up that investment depreciate with time, the amount of depreciation needs to be balanced by the contributions to the condo reserve fund. When depreciation and reserves are in balance, the property value remains intact - is sustained. Reduced or deferred contributions are a sure pathway to reduced property value.Determining exactly what those contributions should be from year-to-year is the final work product of a reserve study.
A reserve study, prepared by qualified reserve advisors, will set the stage for a client's long-range management of the capital assets of a condominium community in a business-like manner.
Why would an association want to have a Reserve Study done?
That's the first question we, as reserve advisors, ask our client during the kickoff meeting that always initiates our reserve studies - "Why are you having this study done?" We don't assume we know the answer - we want to initiate the collaborative process. Here are some of the typical responses we receive:
- "We have some big projects coming up and we need to know if we have enough in our reserve fund to pay for them."
- "We think we have enough in our reserve fund now, but we're not sure about 20-30 years down the road"
- "We just transitioned from developer to board control. We need to know where we stand."
- "We know we have some issues with decks and drainage. How do we work that into our reserve fund?"
- "Each year at budget time we seem to use a different formula for computing contribution to our capital reserve fund.
- What should it be? How do we justify it to the membership?"
- "We feel we need the benefit of some strong technical experience and ongoing advice."
Bottom line - a Reserve Study is all about sustaining value ...
The next step ...have a Reserve Study done.
We would be pleased to provide a no obligation proposal.
Burns Associates - Engineers
PO Box 395 Rye Beach,NH 03871