What's in Your Wallet? The Importance of Healthy Reserves

 Unless it's a thoughtful gift or a party in their honor, nobody likes surprises.  That's especially true when it comes to sudden, serious, or non-negotiable  repairs to a co-op or condo building. A building community must have enough  money saved to deal with major projects as they arise, or risk major financial  and structural troubles. But economic woes of residents such as unemployment or  default, or living on tight fixed incomes, means more HOAs are finding it  difficult to keep their reserves adequately funded.  

 But ignoring this important savings fund puts both community administrators and  residents on a path to inevitable problems. Reserve funds play a crucial role  for an association, and neglecting them may seem okay now—even prudent—but doing so can compound a maintenance issue into an out-and-out crisis.  

 Reserve Studies 101

 “When you’re managing a facility, whether townhomes, co-ops or condos, there’s a responsibility to the common areas that isn’t the responsibility of the individual owners,” explains Alan Mooney, P.E., president of Criterium Engineers, a nationwide  consulting firm with its largest and oldest office, Criterium-Tauscher  Cronacher in Manhattan. Within that, Mooney says, there are two categories: one  that covers general annual maintenance costs and the other that addresses  non-annual work, “the things that you wouldn’t put in a normal annual operating budget.” A reserve study identifies this second group of items. This may include costs  of regular updates on major building systems like hot water heaters and  elevators. It also should include enough for unpredicted repairs.  

 The reserve fund is the money that an association puts aside to meet the needs  of that reserve study. Finding the right firm to handle your reserve study  entails some homework on the part of the board. Look for someone with  established professional credibility. Some licensed architects may conduct  reserve studies but they are typically handled by a licensed professional  engineer.  

 If you’re considering someone without either of these professional licenses, check to  see if they're a reserve specialist or RS, the certification for which requires  a number of completed courses of study, plus references. In order to earn an RS  designation, “Basically, you have to demonstrate a legitimate track record,” Mooney says.  

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