The Risk of Failing to Reserve

Our Latest seminar, titled, The Risk of Failing to Reserve was held on Tuesday, August 20.  Fifteen Board Members were in attendance and the comments collected were very encouraging.  If you were unable to attend, I have pulled out some of the highlights and we have also posted the power point presentation from this Seminar for your review. 

Seminar Highlights: 

Reserves are a function of developing a budget.  As an association, we need to ask ourselves, do we want to budget for the amount of fees we assess or do we want to budget based upon the needs of our communities.  The needs of our communities include replacing general common elements (GCE) once their effective life is over.  To determine what those GCE’s are and their current replacement cost is a major component to developing a reserve study.  The rest of the study is a mathematical exercise that is easily attained.

We are at the budget time of year for most communities.  Approximately 70—80% of your budget should be easily determined based on fixed expenses outlined in your governing documents.  The cost of sewer and water, electricity and insurance can easily be determined by examining your budget worksheet provided by your site manager or at one of our budget workshops.  The balance of your budget needs can be completed by talking with your Board about maintenance needs routinely provided by your community.  The reserve allocation must be addressed based upon the current status of your GCE and the current cost for construction labor and materials.  Your managing representative can provide the name of reputable companies who can produce a professional reserve study for your communities’ use.

Funding reserves takes nerves of steel, a resolve to address tomorrows concern and a choice to raise today’s fees a minor amount to avoid large additional assessments in the future.  The choice is yours and the implications impact your entire community.

For the full presentation, please click here

Haste Makes Waste, and Lots of Water

Just before the Holidays, I made a  fateful error involving water and my condo unit.  While attempting to accomplish several  household tasks at once, I inserted the plug in my laundry soaking tub and turned on the hot water.  I am given to not being very patient and have physical and psychological needs to multitask.  The solitary task of watching water run and slowly fill a sink drives me crazy so I automatically looked  around to see what else I could accomplish. I loaded the washing machine, emptied the dryer and carried the laundry basket into our bedroom to begin folding and sorting items. Feeling satisfied that I had completed this mundane household task, I turned on the television and promptly fell into a deep slumber which was interrupted at 2:00 AM when the ceiling tiles in the basement began  crashing to the floor. There is an old saying in the construction world that “water always wins”. Believe it.  The companion mantra we have in the management world is, “insurance is the most important facet we deal with for our associations”. My minor error in multitasking has taken nearly 3 months to rectify but with the help of a great insurance company and repair and reconstruction company, the end is in sight.

My issue and many more will be discussed and evaluated in light of the master insurance coverage at our Tuesday, April 9, 2012 evening seminar.  Plan to come to the Taylor Rd. office to work together on this most important topic.  We are also going to cover issues of fraud, fidelity bonds and management tools to control theft.  It looks to be a busy evening.  Hope to see you in attendance.

Keeping Up With Restrictions

Happy Valentine’s!  As I am working my way through this blog posting, I am alternating between the computer and the laundry room because tomorrow is moving day.  Our vacation is ending in Florida and we have to prepare this condo for visiting guests.  In addition to making sure the unit is sparkling clean and linens folded, I remember  the necessity of  insuring  that our guests know the rules of this community.

In Florida, the governing documents are referred to as Declarations and they are as bulky and uninteresting to read as our well known Master Deed and Bylaw.  Failure to heed some traditional restrictions could ruin an otherwise great vacation.  The draping of a beach towel over the deck rail is guaranteed to produce a visit from a concerned Board member and parking in the incorrect spot will insure towing.  So to reduce the risk of problems, I will print off the “hot topics” and leave them for our friends and visitors to read. 

On our daily walk this morning, my husband and I discussed “hot topics” for associations we represent for Cummings.  We have agreed that annually there are 4-5 issues that we need to focus on for most associations.  To keep those topics first and foremost in the mind of our Directors, we plan to list those goals in the body of each meeting agenda.  That way we will be able to review the goals with every Director and adjust expectations monthly rather than falling short of time as the year progresses.  My husbands’ concern for monthly contributions to the community reserve funds will be #1 for his associations.

Your Board of Directors should collectively have the same goals for minimizing risk as well as enforcing restrictions. Make it a point to discuss with your manager what the hot topics are in your Association. Your fellow homeowners will often call our office without hesitation to share a concern about a possible "violation" in your community. Make sure that infomration is being shared with the board on a regular basis so you know exactly what your membership expects. 

With the winter half over, I hope you have found the time to rest and recharge.  Plan to make a goal for 2013 to meet with us and your fellow comrades in condominium directorship at one or more of our training sessions.  Together we learn so much!

Failure to Plan is a Plan to Fail

It is January and my husband and I are spending time at our winter residence.  These are the days we relax and redefine our lives.  Each year we use this time to review what has happened over the past 12 months, analyze the things that haven’t worked out so well, and make plans for the coming months.    One of our interesting experiences in January is to participate in our association’s annual meeting.  To say the least, it is unsettling to be on the other side of the room listening to, rather than presenting the financial data.  Florida Condominium rules are extremely different than Michigan regarding handling finances.  Reserve funds are assigned to specific categories and are voted on annually by the membership.  Since we are creatures of habit, our building’s membership annually votes to fund the reserves at the lowest allowable minimum.  Our finalized budget carries an ominous warning that says  we have chosen to under fund the reserves, and that we acknowledge the need for future large additional assessments to repair the pool, re-roof and to repaint the building.  Great! 

It is definitely easier planning other people’s monies than it is to be the recipient of bad financial decisions made by ill-advised Directors.  To offset our potential future financial risk, we are discussing setting up the Rick and Kay Florida reserve account so we have the funds on hand when the repairs are contracted.  Forewarned is forearmed. 

This is the same philosophy we adhere to at Cummings Management  by forewarning Directors of the inherent risks associated with community management  and  exploring ways to assume and assimilate all risks.  To this goal, we have scheduled the first two seminars for 2013 and hope to see every Director taking advantage of one or more of our seminars.  We hope our topics are of interest and we encourage  you to join us  at an upcoming Seminar.