Montage

The Association

The Montage faced an urgent and unexpected maintenance issue from the get-go, which threatened to drain their existing budget and create an unpleasant resident experience. Soon after its remodel was completed, a construction-related incident caused a massive water leak in the building. In addition, individual units were seeing water leaks on a regular basis. In many cases, the problem would initially go unnoticed, which would have a cascading effect on additional units (in some cases, six other units were affected by the leak in one). Because the CC&Rs state that the association has to prevent and replace anything in the units, the Montage was paying $25,000 to $100,000 out of pocket for every unit that experienced a leak.

While most of the cleanup and repair was covered by the building’s property insurance, their original insurance company cancelled the policy, and their second insurance company raised their deductible to $25,000. Sarah McCalla, The Montage general manager from FirstService Residential said, “Through no fault of their own, the association was already dealing with a deficient operating budget. They couldn’t pay invoices for basic things like maintenance, let alone a significant water leak affecting the entire building.” Also, because of the association’s unique situation and recent transition, their reserves were underfunded too. The assessments were too low to adequately fund the reserves. Major components were left out of the original reserve study, which created a big budget problem. They were not equipped financially to solve current maintenance problems or prepare for future capital improvements moving forward. 

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The Solution

To start, McCalla worked with the board and reached out to several other FirstService Residential-managed high-rises to get recommendations on how to solve the water leak issue. Because they were initially working with a limited budget, high insurance deductibles and underfunded reserves, they needed a long-term solution to avoid ongoing costs. One FirstService Residential association in San Francisco recommended that they use a water sensor system to detect leaks immediately. This would enable the resident to detect the problem immediately, inform maintenance and shut off the water to avoid high costs charged to the association. They put this plan into action immediately, landing on a vendor and determining how to pay for it. Some of the project milestones:

• General manager McCalla contacted other high-rises in the FirstService Residential network to research and find a long-term solution to take care of the problem: a water sensor system
• Board and general manager decided to use a California-based commercial leak detection firm after evaluating several vendors with experience
• Board worked with general manager and FirstService Residential to determine funding for the water sensor project; deciding to take a capital improvement assessment of $450,000 
• To ensure the association was able to pay for the initial water sensor fee without pulling from the operating budget, FirstService Residential and general manager recommended that homeowners receive a discount of 10% if they paid the capital improvement assessment upfront – that way, they would not have to pull directly from their operating budget 
• Installed water sensors in each unit in order to detect leaks immediately on a unit-by-unit basis and prevent significant expenses going forward

FirstService Residential associates in San Francisco recommended that they use a water sensor system to detect leaks immediately. This would enable the resident to detect the problem immediately, inform maintenance and shut off the water to avoid high costs charged to the association. 

The Results

With a proactive board, a highly invested general manager and the support of the FirstService Residential network, The Montage Owners Association was able to make significant changes that have helped cut costs and ensure financial stability in the short- and long-term future. McCalla said, “This association and the board have dealt with many unexpected issues that no one could’ve counted on. But with the support of FirstService Residential, FirstService Financial and the tenacity of the board, their financial state continues to improve in leaps and bounds.” How has this played out?

• Water sensor technology has caught upwards of 38 leaks, allowing the building to take care of each problem immediately before they resulted in costly damages, with potential savings ranging from $350,000 to $475,000 (based on previous expenses of about $95,000 per year) 
• The board has focused on funding reserves to prepare for future expenses and are now able to fund their reserves adequately 
• The general manager and board have worked with FirstService Financial to significantly improve investment returns going forward, investing settlement funds into CD accounts that are expected to yield approximately $150,000 in annual interest.

This association and the board have dealt with many unexpected issues that no one could’ve counted on. But with the support of FirstService Residential, FirstService Financial and the tenacity of the board, their financial state continues to improve in leaps and bounds.
—Sarah McCalla, General Manager for The Montage