The Good, the Bad and the Ugly Doing a Capital Needs Assessment

With natural disasters causing catastrophic property damages becoming more common, associations must be prepared for unexpected expenses, such as a major roof repair, or the installation of a new heating and cooling system. These major capital improvement projects typically come at a great cost, and are rarely popular with residents, who must bear that cost. It's up to association boards to plan ahead and have contingency funds available to cover these types of projects—but all too often, that doesn't happen.

But what exactly are capital improvements as defined by industry professionals? When talking about capital improvements as related to a residential community one is speaking of the property components that have a defined useful life and will need replacement at some point in the future. Experts point to such things as roofs, sidewalk pavement and roads, exterior siding and boiler and HVAC components as having a certain life span that over time will need to be replaced.

Failure to Plan

While usually well-intended, associations, regardless of location or residential income levels, tend to make common mistakes when it comes to budgeting for required improvements such as new roofs, windows or paving.

“The biggest problem boards face is not having the information they need to adequately budget and make critical decisions,” says Stuart Wilkinson with the Reserve Study Group, a national consulting firm. “Boards need to arm themselves with information, including a reserve study that helps them not only understand their current circumstances but what options they have moving forward.”

“Most educated boards and associations do understand the concept of budgeting for capital improvements,” says Mitch Frumkin, PE, RS, CGP, the president of Kipcon, an engineering consulting firm with offices in New York City and North Brunswick, New Jersey.

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