Your Repair and Replacement reserve fund is what helps your association anticipate its future expense needs – and budget for it, too. This fund gives you the power to maintain the quality of your community by allowing for projects that are both necessary and expensive (like a future roofing or paving project, for instance). The Virginia Condominium Act
and the Virginia Property Owners Act
state that full reserve studies are required every five years and that reserve study updates must be reviewed annually and adjusted as necessary to keep the funding of reserves sufficient. The Condominium Act also requires that condominium resale certificates disclose a projected budget which includes provisions for reserves and capital expenditures.
Needless to say, establishing this fund can get a little complex. The good news is that you don’t have to be a fortune teller to read the future of your association... you simply need a good reserve study firm to help. Here’s how you can find one.
1. Create an association profile.
First of all, any prospective firm you work with will want to know about your association. Gather information on your association and develop a complete description of it. Include details such as the location, number of units, description of buildings, list of amenities, a current financial statement and budget to demonstrate how much money has been set aside to date, and what future contributions to the reserves will be, etc.
2. Find your firm.
Searching for candidates is easy. Good property management companies maintain a list of qualified firms. You can also check with your local chapter of the Community Associations Institute or go to www.caidc.org
for local engineering and reserve specialist information. “Remember to seek input from your community manager, your attorney or your association’s audit firm,” said Mark Bailey, vice president for FirstService Residential. “Your professionals know who the other professionals in the local market are. Take advantage of positive word-of-mouth.”
3. Ask the right questions.
Decide what criteria you’ll be using to evaluate your candidates. You will get a clearer picture of the end product by asking questions such as number of years in business, number of studies performed per year, company background, specific experience with communities like yours, preferred funding methods, pricing methods, time it takes to complete the work, association involvement, the number and cost of on-site property visits and types of guarantees. Identifying the most important factors when it comes to hiring a firm for your association will help you narrow down the candidates.
Bailey notes that it is also important to engage a firm that will include at least one face-to-face meeting with the Board of Directors to explain the report and the methodology that was used to complete the study. “Do not consider a firm that tells you the study can be completed without a property visit,” he said.
4. Make contact.
Reach out to your candidate firms with a request for standard informational material, such as examples of previous reports. Then ask the questions you developed earlier, carefully recording the answers. As you interview more firms, you may find that your questions evolve as well. Don’t be afraid to go back to firms if you come up with new questions, and don’t forget to request three references.
Your research is done; now is the time to make a comparison matrix. Here’s a simple suggestion: make a spreadsheet that lists your hiring criteria in the left-hand column; then list your candidate firms across the top, horizontally. Use your research to fill in the boxes. At this time, you’ll also want your accountant to review the sample reports your candidates provided to make sure they meet your federal filing needs. When your matrix is complete, eliminate those that don’t meet your most basic requirements. The rest are up for evaluation.
6. Reach out to references.
Contacting the remaining firms’ references should involve brief conversations. Ask simple questions such as whether the association was pleased with the firm’s work, whether their association is similar to yours, when the study was performed, if cost expectations were met, if the study was delivered on time, if there was something they wished the firm had done differently, whether they considered hiring other firms, what factors they used in choosing this firm, and whether or not they’d hire the firm again. Limit questions to ten, and be efficient, friendly and respectful of their time.
7. Decision time.
You’ve identified candidates. You’ve interviewed them and eliminated the non-contenders. You’ve compared them on a candidate matrix. You’ve reached out to their references. Now you have all the tools you need to make an informed decision.
Partnering with a reserve study firm can have a huge impact on the future of your association. Follow these steps and you’re sure to find yourself working with a quality firm that meets your expectations. For more help, contact FirstService Residential
, Virginia’s leading property management company.