7 reasons to not ignore your condominium reserve study:
- Deferred maintenance: Without a reserve study, it can be difficult to budget for and plan for major repairs and replacements. This can lead to deferred maintenance, which can cause the condition of the condominium/ homeowner complex to deteriorate over time.
- Special assessments: If the condominium/ homeowner association does not have enough money in its reserves to cover a major repair or replacement, it may have to levy a special assessment on homeowners. This can be a significant financial burden for homeowners, and it can also make it difficult to sell condominiums / homes in the complex.
- Property value decline: Deferred maintenance and special assessments can lead to a decline in the property values of condominiums in the complex. This can make it difficult for homeowners to sell their condominiums / homes for a fair price.
- Liability exposure for board members: If the condominium/ homeowner association fails to maintain its property properly, the board members may be held personally liable for any damages that occur.
- Increased costs: The cost of repairs and replacements typically increases over time. This means that if the condominium/ homeowner association does not start saving for major repairs and replacements early, it will have to pay more for them in the future.
- Reduced quality of life: Deferred maintenance can lead to problems such as leaks, mold, and pests. This can make it uncomfortable or even unsafe for homeowners to live in their condominiums / homes .
- Difficulty obtaining financing: Lenders are more likely to approve mortgages for condominiums / homes that have a well-funded reserve study. If a condominium / homeowner association does not have a reserve study, it may be more difficult for buyers to obtain financing.
Overall, ignoring a reserve study is a risky proposition. It can lead to a number of problems for condominium associations and homeowners, including deferred maintenance, special assessments, declining property values, and liability exposure for board members.
Here are some tips for avoiding the consequences of ignoring your condominium reserve study:
- Review your reserve study regularly: Reserve studies in Washington State should be updated yearly to reflect changes in the condition of the condominium complex and the cost of repairs and replacements.
- Make sure your reserve study is accurate: Reserve studies should be prepared by a reserve professional. If an association is not happy with the reserve study or feel its inaccurate, they should meet with their reserve provider and correct it.
- Create a yearly funding and maintenance plan that is consistent with your reserve study: Your condominium/ homeowner association’s budget should include enough money to fund capital projects and annual contributions to reserves.
- Communicate with owners: Owners should be informed about the association’s reserve study and the budget that is needed to fund it. This will help to avoid surprises and build support for the association’s financial planning. In Washington State owners should get an annual disclosure on the status of reserves and whether special assessments are planned in the next 5 years.
