The purpose of a reserve study is to give the Board Members of the Homeowners Association and the property manager written guidelines for properly maintaining the common elements. The Governing Documents of most Association-governed communities require the Board of Directors to set aside an “appropriate” amount of money on a regular basis to offset the ongoing deterioration of the common areas.
All physical assets deteriorate with time and most of the “major” components which an Association is responsible to maintain will require repair or replacement in a predictable manner. A credible, current Reserve Study makes it possible to prepare well in advance for these inevitable expenses, spreading out the reserve contributions evenly over time, rather than funding reserves through special assessments or loans
An effective reserve study plan must meet the following five key objectives:
- To preserve the investment of the owners.
Preventive maintenance can extend the useful life of building components, in turn, maintaining and enhancing the value of the property.
- Buildings operating at peak efficiency.
Preventive maintenance ensures that building components are operating as they were designed, which helps to reduce inefficiencies in operations and energy use.
- Prevent failures of building systems.
Properly functioning building systems allow occupants to enjoy the property as planned. Preventive maintenance includes periodic inspections and replacement of equipment that are crucial to operations.
- Maintain a safe and healthy environment.
Protect the physical integrity of the building; maintain a safe environment for residents.
- Provide cost effective
Preventive maintenance can prevent small problems from becoming major failures and costly repairs. Preventive maintenance can be handled relatively inexpensively, efficiently and systematically.
What should be included in a reserve study? There is a four-part test, now part of National Reserve Study Standards, to determine if a component is appropriate to designate for reserve funding. To be funded, a component must pass all four of the tests.
- The component must be a common area maintenance responsibility, as defined in the Association’s governing documents or a well-established Association precedent
- The component must have a limited Useful Life (UL)
- The component must have a predictable Remaining Useful Life (RUL)
- The component’s Replacement Cost ($) must be above a minimum threshold amount
If consistently followed in conjunction with a proper funding model, the components will enjoy their maximum useful life and repair costs will be held to the minimum. This is how the successful homeowners’ associations operate.
For more information on how Beacon Management Services can assist your Homeowners Association or Condominium Association in the Atlanta area, please call: (404) 907-2112 or email Lisa Simmons at firstname.lastname@example.org. Our complete list of services is available at: www.beaconmanagementservices.com.
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