News

Seeing Clearly with Window Replacement

Challenges Associated with Window Replacement

Window replacement can be one of a condominium board’s greatest challenges. This is due to elements of mystery, timing, and high cost. For a variety of reasons a unit owner may want to replace one or more of her unit’s windows. After following the condo’s guidelines for obtaining approval from the board or the building committee, approval is typically very straight forward. The problem arises when the project involves replacing many or all of the community’s windows.

Window Ownership

Windows typically belong to the unit owner and are not a common element under most condominium rules. Often complicating this issue is the ownership of windows is not always clear in the original condo documents. Sometime the board finds the matter of ownership was determined by a past board decision based on an incorrect interpretation of the condo’s documents. Therefore, when in doubt, the board should check with the condo’s attorney for the final determination.

Assuming it is confirmed the windows belong to the unit owner, the building committee is not off the hook with window leaks or other window failures, as these same condo rules assigning the windows to the unit owners also assign the window frames to the association’s responsibility. In many cases it is not the window that is leaking but the frame’s flashing (or lack of flashing), structural framing, or other common element causing the problem.

Window Replacement

Poorly installed windows not following the manufacture’s instructions are one of the biggest sources of unit owner complaints. Often the only solution is to remove the siding around the window, inspect the flashing, and re-flash. Many such problems can be minimized by preventive inspections using either visual methods or instruments such as moisture meters to focus on the specific moisture path to diagnose the issue.

Most window replacement projects are due to age. Quality windows will last more than 30 years. Environmental factors such as high wind areas or proximity to bodies of water can have an adverse effect on the useful lives of some types of windows. Window seal failure on a limited percentage of windows can also prompt their early replacement. And, interestingly, the driving factor in most condo window replacement projects is not the age of the windows, but the age of the siding.

Window Costs

It is not unusual for a condo unit owner to be faced with having to pay for window replacement because the community has made the decision to replace the siding. The lifecycle of the condo’s façade may not be in sync with the age of the current windows. Replacing or changing a community’s façade is a difficult decision in itself. As the fenestration elements of the façade include security issues, sightlines, and air flow matters, the board may decide the windows also must change. Recent national findings have shown the importance of improving air quality in older buildings by introducing natural ventilation. This may require communities to consider changing the type of windows replaced in the future.

Window Choice

Choosing the best replacement window can be a daunting task and often a board will need the advice of a professional such as an architect, engineer, or window supplier. Choices of style, functionality, and installation types can be wide-ranging with some windows eligible for a $500 federal tax credit. The first decision is often whether the replacement will be ‘full-frame’ window requiring exposure of the rough opening or an ‘inset’ replacement. This decision will be dictated by both cost and the impact of the window project on the siding or other framing considerations.

Today’s typical high-rise windows frames are metal while low-rise residential window frames will have a vinyl exterior surface. From there, the decision makers will turn to selecting the type of glazing (window glass) where both initial and life cycle costs of materials and energy conservation will be considered. The initial consideration is double- (two-panes) or triple-glazed (three panes). Maine’s northern climate would suggest triple-glazed is the best choice to reduce both energy loss and noise transmission.

It is at this point the need for window expertise comes into play. Window performance can be greatly improved by changing the chemical composition or physical characteristics including the use of tinted glazing or reflective coatings and films to reduce heat gain and glare. Some low-emittance coatings have been developed to improve both heating and cooling season performance. Other manufacturers use low-conductance gas fills between the glazing layers with thermally improved edge spacers to meet performance goals.

The board’s window consultant will be able to guide the board through this decision process to select the optimal window performance within the community’s budget restraints. Windows are a long-term investment, increasing the market value of the units while reducing the life-cycle costs of heating and cooling. Making the correct window replacement decision now will allow the project to see a clear success in the future.

Article written by Jack Carr, P.E., R.S., LEED-APCriterium Engineers
Published in Condo Media April 2021 edition
Download a PDF Version of this Condo Media “Seeing Clearly” Article

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About the Roof

About the RoofInspection Techniques for Surface Survival

The roof surface of your condo building is probably the most important common element under association control. Water intrusion into the interior will cause more damage or unit owner outrage than almost any other problem brought to the board’s or property manager’s attention. It bears careful consideration.

There are many types of roofing materials here in New England – roll/built-up roofing, wood shingles, metal, fiberglass shingles, etc. – but for ease of discussion, let us focus on the most common: high-slope asphalt composite shingle and low-slope membrane roof surfaces. Inspection techniques tend to be similar for all types of roofs.

Most roofs tend to last 20 to 30 years, but many factors can cause those estimates to vary. Warranties on roofs should not be confused with how long a roof will survive, as warranty is another word for pro-rated insurance coverage. Roof surface survival is more dependent on the quality and thickness of the material, skill of the installation, ventilation on the underside of the roof, and periodic maintenance than all the warranties in the world.

High-Slope Asphalt Composite Shingle

A periodic inspection by roofing professionals is always a good idea, but most roofs can be easily inspected with a little instruction and a systemic approach. The first thing to remember is climbing a ladder onto a sloping roof is the last thing you should consider. The condition of many roofs can be determined with binoculars and viewing the roof at the proper angle and time of day.

That said, the condition of a roof can often be best determined from inside, such as in the attic. The inspection should include observing the condition of the roof’s underside whether it be metal or wood product sheathing. Old and new leak stains should be noted, as well as their locations relative to roof penetrations and other reference points that will warrant further investigation during outside viewing. Attic inspections should also note the quality or lack of ventilation. All vents, including ridge, gable, and soffit vents should be clear of obstructions and mechanical vents should be operational. There should be a breeze in the attic on a windy day.

Roofs rarely leak in the open field of the roof unless shingles are blown off. Therefore, the roof inspection should focus on transition points of dissimilar materials or junctures of roofs and walls, such as dormers and chimneys. All skylights, vent pipes, and other roof penetrations should be monitored.

When on the ground, viewing the roof at an angle will help note irregularities or the first sign of aging and failure. Problems to observe on the inspection log are edge curling or other shingle movement; wavy shingle lines; cracked or missing shingle tabs; and loss of granular particles found in gutters from the shingle surface. Walking on shingle roofs showing signs of shingle movement can cause severe damage and lead to accelerated roof failure. Debris in roof valleys or valley flashing condition should always be noted. Shingles with a southern exposure will fail first. Observing the roof surface eave edge for damage from ice dam removal, rusting drip edges, and lack of a three-eighths-inch drip edge are all signs of early problems. Chimneys without crickets to divert water and ice are more susceptible to water infiltration and flashing failure.

Low-Slope Membrane Roof

Flat EPDM (black) or vinyl (white) roof membrane surfaced roofs are easier to inspect. They are also excellent candidates for thermal (infrared) scanning surveys. Issues to note are the condition of the surface coatings, punctures, cracking, alligatoring, blisters, fish mouths at seams, blocked drains, and ponding. Problematic conditions are ponding or the dried-up outline of prior ponding, which indicates poor drainage and can be a source of water infiltration. Roof membranes are designed to allow ponding for only a few days. If ponding is persistent over extended periods, the membrane will deteriorate, and seams will fail prematurely.

The heavy snow loads in New England are hard on low-slope roofs. Roofs are often cleared of snow to reduce dead load. The extra traffic on unprotected membranes can cause severe wear, especially in areas where the insulation boards beneath the membrane have their mechanical fastener heads touch the membrane’s underside causing tears.

No matter how many or what type of roof surface you may be responsible for, having a systematic way to keep track of the roof’s condition is invaluable. A maintenance log of leaks, repairs, and observations produces a very organized approach to facility maintenance. A checklist with the issues listed in this article with photos illustrating roof problems can go a long way to keep maintenance cost down and rain out.

Article written by Jack Carr, P.E., R.S., LEED-APCriterium Engineers
Published in Condo Media March 2021 edition
Download a PDF Version of this Condo Media “About the Roof” Article

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The Invisible Wall: Site Walls Should Not be Out of Mind

Retaining wall inspection

There is no condominium community asset more overlooked than its site walls. They literally become part of the landscape and seem to disappear, yet they are vital to the health of the community. They are sometimes called retaining walls or sometimes simply landscape structures, but in the hilly interiors of Maine or the rugged slopes of the coastline, these structures allow the very existence of some condo communities.

They can be made of many different materials. They can be poured concrete, steel, or timber. They can be concrete block or stone or brick. They can be very tall or very short. Whatever they are, if they fail, they can be dangerous and costly to repair. So, a prudent grounds committee should schedule regular inspections and maintain a log of repairs.

Retaining Wall Inspection
Schedule and Checklist

It is recommended retaining walls be inspected four times a year, that is, before or after each season. Heavy rains or soil frost movement can have a significant effect on a retaining wall in a short time. At the very least, someone should perform an annual inspection and compare those findings with the year before.

Grounds Conditions

Like us, aging retaining walls deteriorate primarily because of gravity. This can be due to the excessive soil loading behind the wall or the weight of the wall overloading the soil conditions beneath the wall. The increase of forces behind the wall is often the result of water build up due to surface water above the slope percolating into the ground or a raising ground water table. Weep holes are designed to reduce this increase in hydrostatic pressure, but weep holes can be blocked by debris or overwhelmed by the quantity of water.

One of the first steps in the inspection process is to observe the conditions of the ground surfaces upslope of the retaining wall. Some walls have trench or other types of drains to intercept the water while some ground surfaces are designed to quickly drain water over or around the wall before it can enter the ground behind the wall. If water ponding above the wall is discovered, this problem must be corrected. Ponding will occur if the ground settles or is removed due to erosion. If the top surface is paved, cracking in the asphalt or concrete surface can allow unintended water to enter the soil.

Retaining Wall Surfaces

The surface of the retaining wall is the next and perhaps easiest element to inspect. Wall movement should be noted. Walls should lean back toward the slope uphill. If they lean forward or have signs of bulging in any locations this could indicate excess back pressure or failure in the underlying soils. Horizontal cracks are usually more serious than vertical cracks. The first time this is noted it should be brought to the attention of the facility manager or your engineer.

Timber retaining walls can move or crack due to both earth movement and insect attack. Timber wall elements can rot with age.  Any type of wall can crack and allow vegetation matter to grow from either side of the wall. All roots, weeds, or other growth should be removed when discovered, as they can apply considerable pressure to the crack and create localized weakening of the wall. Wall cracks in concrete surfaces can allow moisture to reach the reinforcing steel causing excess corrosion creating not only internal pressures from expanding rust, but also provide a passage for water infiltration creating further deterioration from expanding freeze/thaw cycles.

Missing wall stones or bricks can also be an indicator of severe developing problems.  These missing elements may weaken the structural integrity of the retaining wall and indicate excessive soil pressures forecasting future wall bulging, bowing, or bellying either vertically or horizontally.

Changes in Proximity

As the original retaining wall was designed for specific loading conditions, any changes in the general proximity of the wall should be considered. This could include the placement of a structure or other heavy mass on the ground surface at the top of the wall or changes in use of the land by your upslope neighbor. This could include a roadway, parking lot, or the use of road salts or deicers near the wall. It also includes any changes to the pattern of surface water drainage such as switching from a grassy surface to a mulched surface.

Slope Movement

One of the subtlest wall failures is the actual movement of the slope itself. In some circumstances it is possible for the entire hillside to shift or move in mass without damaging the wall itself. For this reason, it is important to document not only the wall but the peripheral areas in the vicinity to ensure any movement out of the ordinary is noted and reported. Especially note any ground movement at the foot of the retaining wall. A visible wall is a safe wall.

Article written by Jack Carr, P.E., R.S., LEED-AP, Criterium Engineers
Published in Condo Media June 2021 edition
Download a PDF Version of this Condo Media “The Invisible Wall” Article

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The Orange Triangle in Our Logo

Orange Triangle - Criterium Engineers logo

Criterium Engineers was founded in the days when building plans were meticulously designed and drawn by hand. The dedicated engineer’s talisman—the plastic drafting triangle—could once be found on almost every drawing table in our offices. And while a clear plastic triangle might easily be lost on piles of white paper, bright orange drafting triangles always stood out brilliantly from the rest.

Yes, computers have replaced some of our tools, but the orange drafting triangle still serves as our logo today. It symbolizes knowledge built up over generations. A true passion for helping people better live and work in buildings they know and love. An unrelenting determination to bring value and to be the very best. These are still the elements of quality engineering consulting—and still the reasons why Criterium Engineers stands out from the rest.

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Finding the Right Contractor

commercial building inspections three options

Selection Process

All condo or HOA boards face the task of hiring a service provider or construction contractor periodically. The final success of this effort often depends on establishing the initial selection process and following it to its conclusion. Most service contracts are routine and do not require significant planning or project management oversight. This article will consider the more complex capital asset or infrastructure repair type of projects with a recommendation of 10 elements leading to a successful project.

These projects typically arise from long term planning such as reserve fund studies or an unexpected failure of a community component such as roof surfaces or roadway. Assuming available funds and the community’s support for commencement of the project, the first decision by the Board is how the project is to be managed. As most board members do not have the skill set or time to actively act as project manager, this role typically falls to the property manager or engineering firm who recommended the repairs.

What to Consider

The search for the Right Contractor begins with the development of the Request for Proposal (RFP) with a detailed scope of work and bidding documents to ensure all responses have a similar understanding of the project’s objectives. The project manager needs to obtain clear direction from the Board on contractor selection criteria; issues to be addressed; and management responsibilities. The following matters are important to consider:

  • Obtain multiple estimates: Review several contractor candidates and select three to provide proposals addressing cost; work methods; building materials; scheduling; and other matters important to the community. Beware of the low bidder and do not lose sight of the importance of quality assurance and confidence in the contractor’s management and technical skills. 
  • Check references: Research contractor’s history with similar projects; depth of experience; prior customers’ view of quality and service. Does the scope of work match their typical work. 
  • Hire local: Local contractors are easier to contact and work with. They are more concerned about their local reputation. They are familiar with local building codes and resources. Selecting a contractor from those featured in Condo Media directories or ads provides some assurance of the contractor has applicable experience on not only technical issues but also the world of condos and HOAs and their special needs. 
  • Make sound decisions: Don’t be pressured into making bad decisions. A common complaint in today’s business climate is the lack of available quality contractors. None the less, do your research and due diligence to find the right fit for your community. 
  • Minimize project risk: Obtain the contractor’s certificate of insurance and ensure available bonds. Use your own insurance company to vet the contractor’s history and review policy limits and coverage. Do not take on unnecessary project liability. 
  • Good documentation: The contract should be comprehensive. Terms and conditions should be well written with a clear description of the scope of work; schedule of payments; estimated dates of project milestones; an understanding of responsibilities and guarantees; detailed procedures for handling change orders and contract cancelation. and signed by all parties. 
  • Payment methods: The timing and method of payment should be well understood. Protocols for documenting contractual changes to cost or schedule should be delineated. 
  • Chain of authority: The lines of decision making need to be well understood. Decision makers should be named with all significant changes to be a written form. Emergency contact information including text, phone; and addresses should be kept current. 
  • Document control: Protocols must be in place to ensure the correct documents and the current revisions are recognized by all parties including contracts; change orders; drawings and specifications. Also, payment submission schedules, warranties; and approved material submissions and approvals need to be kept current. 
  • Avoid the appearance of conflicts of interest: Ensure the contractor’s past or present relationships with board members; unit owners; or property manager is well understood and accepted by the Board.

One issue bears repeating. This is a difficult time to find the Right Contractor due to the risks arising from the lack of skilled labor; escalating costs; and uncertain supply schedules. It means you may need to get creative requiring some deviation from these suggestions. Ask your preferred contractor what he needs to submit a proposal. Perhaps instead of a fixed-price contract the Board can negotiate a fixed fee + cost type of contract. Your property manager or engineer may be a valuable source of ideas to attract the Right Contractor.

Of all these issues, the underlying item to assure a successful project is communication between the parties. This element should be established early during the initial interview process. Are both the Board and project manager comfortable with the prospective contractor? Are trust and rapport expected to continue to grow? If there is doubt, this might not be the Right Contractor.

Written by Jack Carr, P.E., R.S., LEED-AP, Senior Consultant Criterium Engineers
Published in Condo Media

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Where Does Danger Lurk?

where does danger lurk - Decks deck

Most Common Areas of Concern

As a member of the board or the property manager, what element of the condo complex poses the greatest danger to the unit owners and liability to the association? Slips and falls during the icy season? Decks collapsing from rot? Electrical fires? Well, if you picked “decks,” you are almost right.

If the condition of the complex’s decks is a concern, the good news is decks rarely collapse. Wood decks built more than 20 years ago can have some significant deficiencies by today’s standards. Most deck collapses are the direct result of inadequate attachment to the building, that is, the connection between the deck ledger and building band joist. The U.S. Forest Products Laboratory’s recent study of newspaper articles from around the country reported on collapsed decks and showed “nearly every collapsed deck had been attached with nails, rather than bolts, and investigators had pinpointed nails as the cause of the collapse.”

Deck Deficiencies & Inspections

More than 20 years ago many decks were attached to buildings using nails that rust away or simply do not have the lateral holding power of bolts. To make matters worse, developing problems are often not noticed in a casual visual inspection because the ledger board is hidden behind the siding. This problem is compounded by past deck building practices not protecting the ledger due to a lack of adequate flashing. On Maine’s coast, the salty air creates some very corrosive chemistry on deck components. Fortunately, these type of old decks are disappearing from Maine’s condo inventory.

If your building committee wants to perform an in-depth inspection of all components of the decks, there are many publications providing good technical information such as:

    1. Prescriptive Residential Deck Construction Guide (DCA6) published by the American Forest & Paper Association (AF&PA), available as a free download from its website, www.afandpa.org, or stream on YouTube. Though this is not a building code it helps to explain the nature of safe deck building and can serve as an invaluable supplement.
    2. Manual for the Inspection of Residential Wood Decks and Balconies. Written by researchers at Virginia Tech, this manual was published by the Forest Products Society in cooperation with the International Commercial Code (ICC) as a practical guide with good illustrations.
    3. How to Perform a Deck Inspection by the International Association of Certified Home Inspectors (InterNACHI).

Studying these documents could be a rewarding exercise for the members of the building committee, but as stated earlier to truly zero in on the most dangerous condo asset, “decks” is “almost right.” The actual answer is stair and guard rails of decks.

Deck Stairs, Handrails & Guard Rails

Accidents related to stairs are the second-leading cause of accidental injuries in the United States, according to the National Safety Council, responsible for 12,000 deaths annually and for non-fatal injuries costing $92 billion a year. Only automobile accidents take a higher toll.

Handrails must run continuous down the flight of stairs with four or more risers and should be 34 to 38 inches above the treads with a minimum distance of one and a half inches from a wall. Guard rails must be 36 inches above the deck (42 inches for multi-family buildings covered by IBC code) and able to withstand a 200-pound force from any direction. Balusters must be able to handle a 50 pound per square foot force while being spaced a minimum of four inches apart.

A common mistake builders make is to install a handrail not conforming to building code. There are only two approved shapes which do not include a 2×4 or other odd shape. However, the building committee’s primary concern should be safety and not code compliance. The question to be addressed is, “Does the stair, hand, or guard rail provide the safety needs given where the stairway or deck is located, and how it is used.” Accidents are preventable. Regular deck maintenance inspections will find where typical problems can be found. Providing guidance to your unit owners of what to look for and how to report observed deck component issues will go a long way in reducing accidents and raise the quality of life in a real sense.

Article written by Jack Carr, P.E., R.S., LEED-AP, Criterium Engineers
Published in Condo Media
Download a PDF Version of this Condo Media article

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Tips for Dealing with Winter

Winter is approaching much of North America. This season plagues even the sturdiest among us—as with winter comes the inevitable storms of the season.

Here are a few winter tips to help you prepare for and deal with the season:

  • Insulate the attic to keep roof surface cold and help avoid ice dams.
  • Maintain emergency generator’s fuel supply.
  • Insulate pipes in basement and unheated spaces.
  • Check battery-powered equipment, replace any weak or questionable batteries.
  • Confirm operation of an alternative power source for any life support medical equipment in use.
  • Fill the gas tank in your cars.
  • Store drinking water in jugs, bottles, and bathtubs, in case you lose your source of water.
  • Secure outdoor objects.
  • Cautiously proceed with storm cleanup!

When you finish your winter tips preparations and tasks, be sure to get out and enjoy the season. Go for a nature walk, snowshoe, cross country ski, ice skate, or sledding with the kids or grandkids. Embracing the season makes it much more tolerable and enjoyable!

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Water Intrusion Testing: Building Envelope Integrity

When weather penetrates a building, it can be a costly issue that compromises the functionality and habitability of the building and may eventually lead to structural issues. While there is no single tactic that will prevent water from entering a building, incorporating Third Party Quality Assurance during construction or renovation is essential for reducing the risk of future weather-related problems. One important step in the Quality Assurance process is Water Intrusion Testing provided by Criterium Engineers’ Certified Technicians.

Understanding Water Intrusion Testing

Water Intrusion Testing, (also known as Water Penetration Testing) is a set of standardized field tests that evaluate the performance of building installations such as windows, doors, skylights, exterior facades, and curtain walls for water penetration resistance. Often, water inadvertently enters a building because of manufacturing defects. At Criterium Engineers, we adhere to standards set by the American Society for Testing and Materials (ASTM International), including ASTM E 1105 “Standard Test Method for Field Determination of Water Penetration of Installed Exterior Windows, Skylights, Doors, and Curtain Walls, by Uniform or Cyclic Static Air Pressure Difference.”

The process includes an initial test on mock-up installations or early installations in the construction of a new building Results are reported and retesting any failed items is scheduled after recommendations are implemented.

This article concerns Water Intrusion Testing as part of the construction process on new structures. This type of testing is also performed by Criterium Engineers on existing buildings during forensic inspections of reported damage for insurance investigations.

Why Water Intrusion Testing is Important

Water intrusion can lead to several issues, including:

  • Mold and Mildew Growth: Moist environments are breeding grounds for mold and mildew, which can present health risks to occupants and degrade indoor air quality.
  • Structural Damage: Persistent water infiltration can weaken building materials, leading to structural damage and expensive repairs.
  • Legal Issues: A building owner may delay closing on a project if there are leaking issues, which can lead to back charges, missed deadlines, and breach of contract claims if a building is not delivered on time. Legal claims may also be brought against contractors after occupancy if unit owners experience leaks.
  • Aesthetic Degradation: Water stains and damage can ruin the appearance of a building, affecting its value and appeal.
  • Personal Property Loss: Any personal property of building occupants, business inventory or equipment, vehicles, or other items could be damaged if they are inadvertently exposed to water.

While Water Intrusion Tests are only one part of a comprehensive Third Party Quality Assurance program, they are an essential method for reducing the risk of future weather related issues. By including Water Intrusion Testing early, building owners, contractors, and inspectors can identify potential weaknesses in the building envelope system and take corrective actions before significant issues arise.

The Criterium Engineers Testing Process (Based on ASTM E 1105)

Criterium Engineer’s Water Intrusion Testing is conducted in the field and involves the following steps:

  1. Preparation: The test area is prepared by installing a test chamber on the interior side of the building component being tested (e.g. window, door, skylight). The chamber is sealed to prevent air leakage.
  2. Water Spray Rack Setup: A calibrated water spray rack is set up to simulate rainfall. The system is designed to deliver a uniform spray of water over the test area at a specified rate, usually 5 gph/sq ft.
  3. Air Pressure Differential: A blower system is used to create a static air pressure difference between the interior and exterior sides of the building component, with a minimum pressure dependent on the specific installation. The pressure differential is typically set to simulate wind-driven rain conditions.
  4. Testing: The water spray is applied while maintaining the specified air pressure differential. The duration of the test and the pressure levels are based on the building’s location and expected weather conditions, but most tests include four (4) five-minute cycles with one minute of rest between.
  5. Inspection: During and after the test, the interior side of the building component is inspected for signs of water penetration. Any leakage and the time of the leakage during the test is documented, and the test results are used to assess the performance of the building component.
  6. Collaboration: Working with Criterium Engineers provides access to our team of certified Field Technicians, Licensed Professional Engineers, and Building Envelope specialists to discuss potential causes of failing installations and solutions for remediation.


Interpreting Test Results

The results of the Water Intrusion Test provide valuable insights into the weather resistance of building components. If water penetration is detected, it indicates a failure in the building envelope that needs to be addressed, and then retested with the same parameters. Common sources of water intrusion include improper installation, defective materials/components, and design flaws.

Conclusion

Water Intrusion Testing is an essential tool for ensuring the durability and performance of building envelopes. By identifying potential weaknesses and addressing them proactively, building owners and contractors can prevent costly damage or rework and maintain the integrity of their structures. Whether you are constructing a new building or maintaining an existing one, incorporating Criterium Engineer’s Water Testing Services into your quality assurance process is a smart investment in the long-term health and safety of your property.

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Cost Segregation Studies and Bonus Depreciation

For real estate investors and property owners, actively managing tax liability is essential in maximizing ROI. One strategy for reducing tax burdens is a Cost Segregation Study, provided by Criterium Engineers. This is often paired with Bonus Depreciation. When combined, these tools allow property owners to accelerate tax deductions, improving cash flow and boosting profitability.

What is a Cost Segregation Study?

Cost Segregation is a tax planning strategy that breaks down a building’s components into different asset classes with varying depreciation periods. Instead of depreciating the entire property over 27.5 (residential) or 39 (commercial) years, cost segregation identifies components such as lighting, flooring, permanent fixtures, or landscaping that can be depreciated over shorter time frames — usually 5, 7, or 15 years. By accelerating depreciation, property owners can claim more deductions in the earlier years of ownership, which reduces taxable income.

What is Bonus Depreciation?

Bonus Depreciation is a tax provision that allows businesses to deduct a large percentage of an asset’s cost in the year it is first used in service, rather than spreading the deduction over its entire useful life. Under the Tax Cuts and Jobs Act (TCJA) of 2017, 100% Bonus Depreciation was introduced for qualifying assets placed in service between 2017 and 2022. This means that assets with useful lives of 20 years or less could be fully depreciated in the first year. The bonus depreciation rate began phasing down in 2023, with the rate decreasing 20% each year until it fully phases out by 2027 (unless extended by new Federal legislation).

How Do They Work Together?

When Criterium Engineers performs a Cost Segregation Study, we identify components of a property that qualify for shorter depreciation lives. These items are then eligible for Bonus Depreciation. For example: in 2024, investors can take advantage of 60% Bonus Depreciation. If $500,000 of a building’s components are eligible, the owner can deduct $300,000 immediately in the year the property is placed into service. This results in substantial upfront tax savings.

Why Does It Matter?

  1. Improved Cash Flow: Larger depreciation deductions reduce taxable income, and more cash is made available for reinvestment or other purposes.
  2. Maximizing Deductions: Taking advantage of Bonus Depreciation (when available) can lead to significant tax savings, especially for new property owners.
  3. Flexibility: Cost Segregation studies can be performed on properties acquired or renovated in past years, allowing owners to recover previously unclaimed deductions.

For the year 2024, investors can take advantage of 60% Bonus Depreciation, with the rate decreasing each year until 2027. Because it is uncertain Bonus Depreciation will be renewed in the future, now is the time to contact us to conduct a Cost Segregation Study for your real estate investments. The opportunity to maximize these benefits is time-sensitive, so acting quickly can yield the most significant tax savings.

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The Challenge of Aging Buildings

Challenge of Aging buildings blueprint

The Surfside collapse and the resulting loss of life is tragic. In addition to dealing with the far-reaching impact of that collapse, many occupants, owners, and managers of most buildings are now asking whether something similar could happen to their building. The answer is that the structural health and future of any building depends on many variables including age, climate, maintenance, structural materials used, renovations that have occurred, quality of construction, original design, and much more. No building will last forever.

The Surfside collapse has shined a bright light on building inspections, maintenance, reserve funding, and management. CAI task forces created in the wake of the condominium collapse—there were two that I served on including the Building Inspections Task Force and the Reserve Studies and Funding Task Force—will release public policy statements and best practice guidelines. Among the objectives for the CAI task forces efforts was to help guide public policy and legislative action toward reasonable and responsible standards since we should all expect widespread legislative action—no one wants a repeat of Surfside. (See side bar article on the Task Forces work on page 40.)

PLANNING FOR THE DEMANDS OF AN AGING BUILDING

In what I call Stage 2 aging, which takes into account the long-term deterioration of a building, when a building reaches 25 to 30 years old, there are more things to consider than those that are common to most reserve studies.

Many components such as roofs, paint, and HVAC equipment have predicable useful lives; their condition is visible, and they fall within the minimum 20-year (we use 30) study period recommended in the CAI Reserve Fund Guidelines. However, some expensive components such as underground piping and structural components (balconies, exposed framing, water intrusion related corrosion, or rot) have a longer expected useful life but will still need attention. What do you do about those conditions?

IDENTIFY AREAS OF CONCERN

First, the board should identify the areas of concern, then investigate, then plan for addressing the information revealed by the investigation; out of sight, out of mind does not mean those conditions can be ignored—aging and deterioration is inevitable.

For structures, deterioration is typically a slow process; severe weather events or seismic activity can accelerate the deterioration, but it still may take many years before a healthy building starts to show evidence of structural illness. In my opinion, all buildings of more than five stories should be thoroughly inspected by well-qualified individuals for structural soundness regularly: every 10 years for buildings less than 50 years old and every 5 years for buildings more than 50 years old.

CONDUCT STRUCTURAL INSPECTIONS

The structural health of most buildings must be determined by a structural engineer with the right combination of experience and expertise, and the qualifications to be accountable for their work. The presence of cracks in concrete, for example, does not mean much until you consider the location, pattern, size, and character of those cracks. Even structurally healthy buildings often have cracks. Age almost always matters, however, being young doesn’t mean that building is structurally sound. Every building is unique, and the structural inspection of that building should respond to that uniqueness. Age, location, and structural materials are big factors in guiding inspection priorities and procedures.

For inspection protocol, we recommend a two-phase approach:

  • Phase one is a visual examination for evidence of significant structural distress, and then, depending on the results of phase one,
  • proceed with phase two, a more in-depth investigation, possibly including destructive testing.

When possible, the original construction drawings would be reviewed as part of phase one.

INCLUDE FINDINGS IN RESERVE FUND STUDY

The structural inspection report (or other in-depth investigation such as elevators or video examination of underground piping) should then be provided to the Reserve Specialist who would include it in the Reserve Fund Study done for that building, including estimated costs. Reserve Studies should be done (or updated) at least every five years. Reserve Fund Studies are projections for repair or replacement of existing assets. They are a budgeting tool; they are not an in-depth building evaluation.

All of this means more work for the board or management company that should identify systems or components that deserve in-depth investigations and then retain appropriately qualified experts to conduct those investigations. Consultants familiar with buildings and building systems (such as some engineering companies and Reserve Specialists) can assist the board or management company with identifying the investigations that are needed. The resulting reports should be shared with the Reserve Specialist to include in the Reserve Fund Study to assure that the recommended reserve contributions include the results of those investigations. That may mean a significant increase in reserve contributions.

TAKING ACTION

Unfortunately, condo boards are often the roadblock in the process. They get important information from qualified professionals and don’t act on it. My personal experience includes many similar situations.

Why? When the studies and investigations reveal needed work that will require increased funding from the owners, that information may not get past the board to be shared with the owners, or, if it does reach the owners, it may get defeated by a vote of the owners. In some states, associations can even choose not to fund a reserve. CAI is aware of some state and federal legislation that is being considered to mandate structural inspections, assure adequate reserve funding, and mandate action to address the issues revealed.

Being a board member is tough! It involves fiduciary responsibility, accountability, and liability. It means answering to your constituents and it’s a “highly paid” volunteer position. A good management company will make good recommendations, but the board must make the decisions, and that may mean being unpopular with the owners, some of whom may be your friends and neighbors. I have been a president of an HOA board, so I understand the challenge.

Full disclosure and good communication are best. Our buildings are getting older, and we are being challenged to plan for that effectively. A better understanding of your building is the best place to start.

Article written by H. Alan Mooney, P.E., R.S., Criterium Engineers Founding President
Published in Condo Media October 2021 edition
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