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Subject: Is a "reserve study" legally mandatory?
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YolandaD
(Florida)

Posts:4


01/26/2006 11:42 AM  
Our community is a small one (90 units) in Central Florida; 2 years ago the swimming pool was closed because of licking problems etc, the board said they did used to much money to fix it; then we got a letter were they told us that if we wanted the pool open every body will have to pay $500 not our regular dues, of if not they were going to closed the pool and fill it with dirt. You imagine the problem that such a letter caused, as a homeowner i was seriusly concern and decide to get involve, many of us request ( actually demand) an especial meeting, were we ask "were the money went?.We found out that we were paying a person to clean the pool ( even when the pool was close) and $800 bills in water from a pool that was leaking ( no one have the sence of calling the water company and turn the water off)Any way we end up having whole new board ( me as president) We have been working really hard to get the pool open again, we save enough money now to get the pool in order;Our annual meeting is comming soon, I will like to know about "reserve studies" are they mandatory? why the former board did not have one? because the pool got in such a poor state due to lack of funs to properly mantain; how can we the new board be prepare for the future better? We believe the former board did not have a real interest in keeping the pool running, but when you leave in Forida and when you have kids I think a swimming pool is very convinient.What are the pros and con" of a swimming pool? THANKS FOR YOUR HELP,Yoli
RogerB
(Colorado)

Posts:5067


01/26/2006 1:59 PM  
YolandaD, you know the pros of having a swimming pool in Florida!! Some cons are pool maintenance costs, pool supervision, and a BIG insurance policy. MAKE SURE YOU HAVE ADEQUATE PROTECTION IN CASE SOMEONE DROWNS OR IS SERIOUSLY HURT. DO NOT RELY ON FENCING, SIGNS, RULES, ETC.

A reserves study helps with future capital expenditures. I don't know if this is required in Florida, but it is prudent to make long range plans. This will allow you to develop an annual budget which includes estimated yearly operating costs plus annual funds needed for an adequate reserve fund. This can prevent the need for a special assessment which it appears you will need at this time.

RogerB
BarbaraK
(Florida)

Posts:33


01/26/2006 7:37 PM  
Yolanda: I live in South Florida. It is not mandatory to have a Reserve Study, but it is a good idea. This gives you an idea of how much money needs to be set aside for repairs of major items, such as pools, clubhouse roofs, etc. Sometimes you need a "special assessment" to pay for things that you don't have in your budget. I think 90% of communities in Florida have swimming pools or otherwise nobody would want to live their. Good luck to you...
SamuelB
(North Carolina)

Posts:83


01/26/2006 8:39 PM  
For those who are advocating a "Reserve Study", please tell me how much a Reserve Study "worth it's salt" would cost.

I fly because it releases my mind from the tyranny of petty things . . . - Antoine de St-Exupéry
RogerB
(Colorado)

Posts:5067


01/27/2006 7:27 AM  
Samuel, the cost of a reserve study "worth its salt" will vary depending on the number and complexity of the capital investment items involved. Some single family HOAs with limited amenities do their own at no cost. For a 20 year reserve plan the charge is $300 the first time with free updates every three years for the HOAs we manage. Independent professional firms range from $X,000 to $XX,000.

RogerB
YolandaD
(Florida)

Posts:4


01/27/2006 7:49 AM  
THANK YOU Barbara, we are seriusly thinking about this because we believe a pool is a great asset to the community, but we know is a big expense also.So far we have the money need it to get the pool fix to be open this summer, but i want to plan for the future. THANKS AGAIN, Yoli
YolandaD
(Florida)

Posts:4


01/27/2006 7:54 AM  
THANKS A LOT Roger we really apreciate your experience and advice. At the moment we have all the money need it to fix the pool to be open this summer ( we kept the budget as if it was running, so we save all the money for the pool) but I want to make sure this problem NEVER happen again, the old board did not have any plans for the future. Is the having of a pool affect the value market? once again THANKS,Yoli
SamuelB
(North Carolina)

Posts:83


01/27/2006 7:59 PM  
Posted By RogerB on 01/27/2006 7:27 AM

Samuel, the cost of a reserve study "worth its salt" will vary depending on the number and complexity of the capital investment items involved. Some single family HOAs with limited amenities do their own at no cost. For a 20 year reserve plan the charge is $300 the first time with free updates every three years for the HOAs we manage. Independent professional firms range from $X,000 to $XX,000.

RogerB


This is why I am not in favor of a Reserve study. The prices for our condo's ranges from $4,500 to over $15,000. The major function of the Reserves is to provide money when the major maintenance items are due for replacement/repair so that you don't have to implement a big Special Assessment to be able to afford to have it done. If you do a major assessment, then the folks that are the current owners are paying for what previous owners should have contributed toward. This is reason to have strong Reserves, but IMHO, not reason to spend money on a study. I think recommendations by professional consultants like Robert J. Bruss can get an association close enough without having to spend on a study which will be obsolete the year it is published.

I have a lot of respect for RogerB based on his many excellent posts here, but I probably feel as strongly against a Reserve Study as he feels for it. I'm not sure that either of us are right or wrong; just a difference in our thinking on this topic.

I fly because it releases my mind from the tyranny of petty things . . . - Antoine de St-Exupéry
RogerB
(Colorado)

Posts:5067


01/27/2006 8:20 PM  
Samuel, I agree with you. To pay $4,500 to $15,000 IMHO is not warranted. I'll bet most associations have a member who can create a budget, estimate current cost of each captital investment which will be needed and when, and account for inflation over time. Armed with this, they can create a sufficiently accurate reserve study to estimate how much of the annual assessment should go into a reserve fund. A reasonable estimate of reserve needs is necessary in order to establish the annual assessment.

RogerB
SamuelB
(North Carolina)

Posts:83


01/28/2006 8:21 AM  
Posted By RogerB on 01/27/2006 8:20 PM

Samuel, I agree with you. To pay $4,500 to $15,000 IMHO is not warranted. I'll bet most associations have a member who can create a budget, estimate current cost of each captital investment which will be needed and when, and account for inflation over time. Armed with this, they can create a sufficiently accurate reserve study to estimate how much of the annual assessment should go into a reserve fund. A reasonable estimate of reserve needs is necessary in order to establish the annual assessment.

RogerB


Bingo! Now we agree.

I fly because it releases my mind from the tyranny of petty things . . . - Antoine de St-Exupéry
JimR
(Colorado)

Posts:21


01/28/2006 12:40 PM  
It depends on your legal documents and your state rules. Colorado just passed a sweeping change of the HOA rules, and one of the changes is that a HOA have a initial reserve study and one every 3 years there after. Check out your state rules. One thing that has really helped our association is that we hired a Law Firm that specializes in HOA law. We have them on retainer at $140 a month and all phone calls are free. Research on more complicated issues is on a reduced fee basis and is working very well for this Board. We have also turned over all of our delinquent dues collection to them and in 2005 we reduced or delinquency rate from 15% to 5%. and one thing that the attorneys and this board did was to start a forclosuer on a home because of excess dues delinquency ($450.00). When that word spread through out the community, a lot of dues started to be brought up to date. We also passed a stiffer penalty for delinquency. Our penalty is $25.00 after the 10th of the month on a $28.00 dues assessment. Almost doubling their dues assessment and that also has helped.

A reserve study is one of the most important things that a association can do for itself. If my association did not approve the expenditure for a reserve study this year, which they have, I was planning on selling out in the near future. I do not want to be around when the Board has to send me a onetime special assessment of several hundred dollars when every member should have been paying a couple of bucks each month all along. This year our annual budget was approved with an attachment that stated our dues are $28.00 for now, but when the reserve study is completed the dues would increase by the studies recommendations.
RogerB
(Colorado)

Posts:5067


01/28/2006 4:34 PM  
Jim, glad you were really helped by paying attorneys $1680($140/mo x 12 mo) plus a reduced fee for more complicated issues. And you achieved a reduction in delinquencies from 15% to 5% by this plus raising your late charge to $25/mo. Questions: When you add the charge for collection of delinquent assessments to the above what is your total annual legal cost?

FYI the HOAs we manage have an annual legal budgets ranging from $0 to $500. We have a 100% collection record and encourage boards to reduce their late charge to $10/month.

BTW Jim, can you post how much was paid for the reserve study and what it entailed?

Thanks for your info,
RogerB

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