RESERVE FUNDING
A clear example of this dynamic occurred at University Towers Condominiums in New Haven, Conn., where a 238- unit building faced widespread resident complaints about noise and energy inefficiency from its original 1958 windows. What began as a feasibility review evolved into a $10 mil- lion, multi-phased replace- ment project after asbestos and structural complications were discovered. With 80%
PROFESSIONAL INSIGHT: The association should work with its reserve specialist to confirm the component inventory reflects the aging of com- ponents over 30 years. For communities more than 30 years old, the board should consider investigating the possibili- ty that other experts such as a structural engineer may be needed for the long-term viability of the reserve compo- nents. As communities age, this review should be performed during reserve updates to confirm any previously long-life components are included in the funding plan.
homeowner approval, the board secured financing for two phases, ultimately completing the project under budget. Management credited consistent communication and education that explained the scope, costs, and long-term implications as critical to gaining owner support for loans, assessment increases, and significantly higher reserve funding levels moving forward. TRENDS: RESERVE STUDY UTILIZATION Banking and Lending Requirements Associations that lack current reserve studies, have inadequate reserve funding, or demonstrate signif- icant deferred maintenance risk being deemed ineligible for many types of loans or mortgages. This has placed new pressure on boards to maintain adequate reserves to preserve mortgage eligibility and protect home values. Insurance Market Pressures Insurance carriers also have become more demanding. In many regions, insurers now require docu- mentation of structural integrity, waterproofing conditions, or major system maintenance before under- writing or renewing policies. Some carriers ask directly whether the association follows reserve study recommendations or whether adequate funding is in place to address foreseeable repairs. Associations with outdated reserve studies or inconsistent funding patterns may face significantly higher premiums, exclusions, or nonrenewal. Reserve studies and reserve funding are increasingly becoming essential indicators of the associ- ation’s financial and physical stability. The external pressures are accelerating the adoption of more rigorous, frequent, and realistically funded reserve study programs. TRENDS: INNOVATION AND ENERGY Reserve studies are an excellent tool for bringing innovation, energy savings, technological advances, cost savings, and environmental benefits to community associations. Drought conditions in many areas of the country have led to increased government regulation of watering and turf reduction. Using inno- vative techniques when replacing reserve components can help associations comply with regulations while generating a return on investment for their operating and reserve budgets.
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