In our guide to capital improvements, reserve studies and their relationship to capital improvements and preventive maintenance were discussed at length. To refresh, a reserve study is a report about the condition and likely useful life of all the major components in your Texas condominium building or HOA community. In a high-rise, major components include things like garage gates and access systems, elevators, trash compactors and boilers; in a homeowners association (HOA), they might include the gate system, pool pumps and clubhouse HVAC system. The report also contains a recommended schedule for repairs and replacements (“capital improvements”) that will be needed over the next 30 years, estimated costs for these projects and a recommended funding plan. All of this information allows your board to set aside money year over year so you can pay for the work when the time comes.
But how do you get a reserve study to begin with? Reserve studies are carried out by specialized firms, often with engineering expertise. A reserve specialist from the firm will tour the property with members of your board and your property manager, documenting major systems and their ages and conditions. Then they will generate a report that helps you plan your capital improvements. Finding the right reserve study firm is crucial to your association’s financial health; if the firm’s projections are off, you might find yourself having to levy a special assessment or take out a loan to cover an unexpected project.
“A lot of the issues I've seen communities have with reserve studies are disparities about how the firm looks at the financials versus how the board is looking at them,” explains Robert Kirby, regional engineer at FirstService Residential. “Their view of your financials and YOUR view of your financials have got to mesh.”
Rebecca Clemson-Petrik, a regional director at FirstService Residential, agrees. She has helped many communities find reserve study firms and worked with them while the study was conducted. “As far as the financials, you have got to provide the firm with the correct numbers to start with or the study is worthless,” she says. “You should use the total reserve cash balance, so the firm’s report begins with an accurate cash value and you can work from there.”
In addition to keeping financial reporting in mind, when looking for a reserve study firm, follow these steps:
1. Paint a picture of your association.
Any reserve study firm is going to need basic information about your building or community: age, type, square footage, number of units, amenities, maintenance records, age of all mechanical components and any replacements you’ve already made.
“Be prepared to answer questions about every part of the place,” Kirby suggests. “If you can find a subject matter expert on your community or building, that’s ideal. It may be your manager; it may be a long-time board member.” Kirby also says to disqualify any firm that doesn’t ask you these questions.
2. Identify possible firms.
Kirby recently helped a community find a reserve study firm after it had gone a few years without having a study done. “You need to start with 3 or 4 firms that seem like they’ll fit your needs. If an engineering firm has done any kind of work on your property before, start there,” he recommends.
Ask your property management team for recommendations. A quality company will have both the contacts you need and the buying power to help your board get the best value for your money. A large management company will also be able to tap into its network and get opinions from other boards about their experiences before you ever talk to a single reserve study firm.
3. Know what questions to ask.
Be prepared to interview the reserve study firm representatives by having a list of questions ready to go. Standard information you’ll get from the firms may answer a lot of these questions. Once you know what you want to ask, set up your interview. Of course, you know to get the basics you’d ask of any vendor. Beyond that, there are a few special questions you’ll want answered.
Let us know if you liked this content!