Today’s article was inspired by a reader email. In a perfect world, your Condo Association has perfect financial forecasting. Whenever a major project is due, you have the reserves ready to initiate without any problems. Unfortunately, very few of us live in a perfect world. Often you will be forced into making trade-offs and prioritizing projects due to a lack of financial resources. In these circumstances, your Board will have to make tough decisions. What factors should you consider when prioritizing Condo Association major projects?
Disclaimer: Every Association is different. There are numerous factors to take into account when selecting projects. Make sure to consult with licensed and bonded engineers, lawyers, and management before making any decision.
Consult Your Reserve Study for a Baseline
A qualified reserve study is a great starting point for prioritizing Condo Association major projects. Reserve studies do a great job of providing a comprehensive list of what might need to be repaired. This list can be used to begin proactively reviewing all the things you potentially might need to look at. From here, you can start identifying what’s in most urgent need of repair.
Perform Proactive Testing
The next step is to begin proactively testing and evaluating systems that might need repair. Some items might present themselves on their own. For example, a water heater nearing end of life may be producing lukewarm water, or you might see leaks in a roof after a particularly intense rainstorm. Other items, like evaluating concrete, might require discrete testing. In general, you don’t need to test just to test. If you have a brand new garage, you probably don’t need to do anything special. But if the reserve study says the garage needs refurbishment at year 20, and it’s year 18, maybe some testing is appropriate.
Prioritize Safety First
If you are strapped for cash, consider safety issues when you are prioritizing Condo Association major projects. For example, a malfunctioning fire system could result in a fire watch (where you have people patrolling your building 24/7 looking for fires because your fire system has been deemed unsafe) and a very angry fire marshal. In some climates, a non-functioning heating system could result in the building being rendered uninhabitable by local authorities, which is also a major concern. Keep these factors in mind when you are selecting what projects to fund and when.
Consider Rate of Decay
Not all systems decay at the same rates. You might be able to stretch an old water heater with replacement parts. On the other hand, concrete repairs can get exponentially more expensive in certain situations. Having a good assessment done by technical representation, combined with an assessment of costs can help you decide where you can wait and where you need to hurry.
Don’t Forget About the Professionals
For every system in your building, there’s professional technical representation who can help. While this can add cost, it can also help you make the tough decisions of what to prioritize based on official analysis by said professionals. If you’ve got five projects you need to pay for but can’t do them all at once, getting expert advice is a good way to make an informed decision.
Think About All of the Factors
One of the hardest parts of leading a Condo Association is figuring out the trade-offs where there are no clear answers. This challenge often comes up when prioritizing Condo Association major projects. You need to make sure you are taking in all of the data points you can. Don’t be penny wise and pound foolish. Pay for the data you need, analyze your cash flows and reserves, and make the best decision you can.