Over the past 30 years we’ve worked with HOAs and Property Managers to complete more than 17,000 Reserve Studies nation wide. In doing so we’ve learned a thing or two about this unique 3-way relationship.
A Reserve Study is a financial planning tool to help communities identify and prepare for future expenditures. A properly funded reserve, according to a recent Reserve Study, is the best way to protect property values and minimize special assessments. You can think of it as one part Physical Analysis and one part Financial Analysis.
Read More: What’s a Reserve Study
Tip 1: Assess the Board
The first thing you should do is assess the board you’re working with. You need to understand early on whether you’re dealing a proactive or reactive Board. We know that a properly funded reserve protects property values and reduces the likelihood of special assessments, but ultimately the decision to fund is not up to you. You can only recommend that they follow the professional advice of the Reserve Analyst.
Read More: The Reality of Underfunded Reserves
California Law mandates a Physical Inspection each year and an Assessment and Reserve Funding Disclosure (ARFD) every 3 years. While the law does not require Boards to fund their reserves, it does require that the information is documented and disclosed either way.
Read More: Reserve Studies and California Law
Tip 2: Use Meeting Minutes
So what happens if the Board doesn’t follow professional recommendations?
As a Property Manager, the best way to protect yourself against unjust blame down the road is to denote such decisions in the meeting minutes.
New Board Members come and go and the first thing they want to figure out is what decisions were made before they came on and why. If they find a Reserve in bad shape the first person they tend to blame is the Property Manager. Make sure you can point to meeting minutes that show the conscious decision to not follow professional recommendations. This is the best way to protect yourself.
Watch as our Chairman, Damian Esparza discusses this issue at a recent conference for Property Managers.
At Barrera and Company, we complete thousands of Reserve Studies each year which have helped our clients comply with the law and prepare for upcoming expenditures.
Interested in getting a Reserve Study for your community? Click here to get a proposal!