A correctly performed Condo Association Special Assessment is one that is not done in haste, but rather after thorough and exhaustive research that demonstrates a Special Assessment is the best path forward. One of the most critical steps in this process is having a firm grasp of the condition of the major systems within your Condo Association. For many established Associations, you already will have a good grasp of where things are, but for new buildings, conversions, or Associations that haven’t built effective maintenance plans, you need to be comprehensively evaluating your Condo Association’s condition.
Testing Major Systems
As discussed in the overview, the first step is to figure out the age and condition of all of your systems. A thorough reserve study will give you a good handle on this, but you can also consult with relevant technical representation for your major systems. For example, concrete usually requires rehabilitation roughly every 25-30 years. Fire systems often need replacement in as little as 10-15 years. You can proactively perform examinations of the systems through a variety of testing methods – if it is plumbing, for example, you might do ultrasonic or robotic testing. This can help find problems before they start showing signs of failure.
The other, more common way of detecting issues is when the systems start to show visible signs of failure. For example – roofs and pipes will start springing leaks, or fire alarm systems will trigger false alarms. A competent Board will contract for testing after the same system has minor failures, with the intent of identifying the cause of failure. There are three types of testing you might consider:
- Spot testing at the area that failed. This is helpful in that you can identify if this is a chronic or acute issue. For example, there might be a piece of piping in the plumbing system that was installed inappropriately, so it’s not indicative of a wider problem. Or, you might find that the piping in that spot is showing signs of age.
- Random sampling testing. This involves testing a “representative portion” of a given system to look for signs of systemic degradation. For example, if you have 50 pipes, you might inspect 10 or 15 of them. It provides greater information as you’re getting statistically significant data, and is cheaper than comprehensive testing. If your building is very large, it may be the most cost-effective approach. However, you do run the risk that you get “unlucky” and the sample doesn’t reflect the system as a whole.
- Full testing. This involves testing everything. In most cases, it isn’t an ideal approach because the extra data points aren’t worth the much higher cost of this testing. However, for smaller buildings (say, 20 units), it may make sense because random sampling would provide insufficient data for a decision.
Often, you’ll perform #1 followed by #2 or #3, depending on the size of your building.
Making Sense of the Data
Once you’ve got the data in, you’ll start to understand what you’re dealing with. You’ll know if the system is failing due to age, an acute cause that perhaps can be treated (maybe you have a termite infestation that’s gone unnoticed), or something else. Ask your technical representation to prepare a report for you as to what the condition of the system is and what options you have for rehabilitation or replacement. Once you have this report of possible paths forward, make sure you get it peer reviewed to confirm from a second firm that the plan proposed is the best path forward. This technical peer review process is a critical step for any major project – you want to make sure that there is a reasonable consensus of engineering experts on your remediation plan.
Pay Less Now, or More Later?
Another important thing to consider is that in many cases, rehabilitating a system sooner than later will result in substantially cheaper costs. Your report from your technical representation should cover this in greater detail depending on the system, but allow me to give you some examples. Concrete-based systems are a textbook case of this trade-off. Depending on the degradation, for example, concrete repairs might cost $1,000,000 now, but repairs in four years will cost $3,000,000 due to continued degradation.
Another factor to consider is if the system’s total failure will incur other major costs. For example, if a fire alarm system fails, your building will be ordered under a fire watch – click here for the procedures in Phoenix, Arizona, as an example. Contracting with a fire watch company is extremely expensive, and the fire watch lasts until the new system is operational. This is another case where proactive repair is far more cost-effective than waiting for a total failure. The lesson here is that while a major system may not fail for several years, your Owners may not be able to afford the repairs if they degrade further. On the other hand, if the report indicates you have a longer period of time before you need to take action, perhaps you can avoid a Special Assessment and instead just raise Condo fees aggressively for a few years.
Once you’ve finished evaluating your Condo Association’s condition, you can start looking hard at your financials and seeing if you can afford the repairs – or if you’re going to need a Special Assessment.
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