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.

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
Download a PDF version of this Condo Media Article

Addressing Building Issues With Caution

Have you ever noticed how fashion and entertainment trends seem to start on the “Left Coast” and work their way across the country before finally arriving in Maine? I call this the “End of Route 95 Syndrome.” Of course, YouTube and other digital social media has sped things up a bit, but the general premise holds true. The same may be true for residential/commercial construction codes and building science. This can make it difficult for condo boards to make an informed choice regarding building maintenance issues, not to mention prospective condo buyers assessing the condition of the unit and the community in general. Who do you call?

Maine Building Code Questions

It often takes a Surfside, FL, disaster for building codes and maintenance practices to change. Elevated deck and balcony structures must now be structurally inspected in California every five years following the horrific collapse of the raised deck on a multi-family building on the UC Berkeley campus in 2015. Exterior building façade failures in cities such as Chicago, Cleveland, New York, and Boston have resulted in those cities enacting mandatory structural evaluations of building exterior façades depending on the inspection cycle dictated in the ordinance and the height of the building.

I am often asked by out-of-state buyers of Maine condo units or condo boards of whether the building meets “code.” After a Maine history of a patchwork of building codes throughout the state, a Maine Unified Building Code and Unified Energy Code was adopted in 2015 following a suite of model international codes. As most buildings in Maine’s real estate inventory were built under a variety of building codes over the years, the question should be: “Does the building meet suitable standards of safety, health, resiliency, and energy efficiency while keeping to a reasonable maintenance schedule.” But who sets those standards, especially for existing buildings?

Licenses and Certifications

Maine does not license or certify its residential or commercial general contractors. Some of the skilled trades are licensed but not the general contractor who is ultimately responsible for the quality and safety of Maine’s homes. Legislative measures to license Maine’s contractors have been successfully defeated by various construction industry lobbying efforts in the recent past. Undoubtedly, someday, this situation will change, but Maine’s self-reliance traditions can be difficult to overcome.

Maine does not license or certify its home inspectors. This fact is often confusing for out-of-state buyers as the inspectors in their state are all licensed by the state. In addition, the home inspection brochures they pick up at a local Maine real estate office or web site have words such as “licensed” or “certified.” Under closer review it will be found the referred licenses are for radon or pest inspections, but not the home inspection itself. Maine does not have the “lemon laws” protecting home buyers in neighboring states, such as Massachusetts, with regard to undisclosed issues affecting the quality of a condominium. Maine’s real estate motto should be Caveat Emptor.

The term “certified” is even more misunderstood. The state certainly does not certify home inspectors, so a good question to ask is, “Certified by whom?” There are many home inspection associations across the country that “certifies” their dues paying members. They are not all equal. The joke in the industry is that in Maine one can be a hairdresser one week and a home inspector the next. The joke, of course, is that a hairdresser needs a license.

So, condo buyers in Maine, as well as condo boards, are typically advised to hire professional engineers (PE) or registered architects (RA or AIA) when they have concerns about structural integrity or other serious building science matters. Similarly, the Community Association Institute (CAI) recognizes the importance of professional competency in preparing reserve studies with the designation of “Reserve Specialist” (RS) for some members.

The greatest advantage of the board having a licensed engineer or architect is the condo board does not have to wait for an ordinance or new code to be approved to make an informed maintenance decisions for its community. A Maine board can utilize their engineer’s or architect’s experience and research done in other parts of the country to make informed maintenance decisions.

Taking Action

If a high-rise condo board thinks it is a good idea for its building façade or elevated balconies to be structurally evaluated every five years, the board does not have to wait for Maine to pass legislation. The board can budget for it in the association’s reserve study as a line item budget where replacement costs are allowed to include related expenses such as structural studies. This is also true for the evaluation of other major systems such as underground infrastructure, plumbing, or other long life common elements. The adage holds true for buildings too in that an ounce of prevention is worth a pound of cure.

Article written by Jack Carr, P.E., R.S., LEED-AP, Criterium Engineers
Published in Condo Media October 2021 edition
Download a PDF Version of this Condo Media article

Reserve Study Guidelines

Are you aware of the significant changes in the Community Association Institute (CAI)’s recommendations for best practices in future reserve fund studies? If you are not, you are not alone. In July 2023, the Foundation for Community Association Research published its Best Practices – Community Association Maintenance manual. Let me explain why this 68- page ‘Maintenance’ manual should be a must read for every condominium or HOA board member. It is available in printed form and the no cost digital version can be downloaded from CAI’s website.

Most reserve fund studies in the recent past have used CAI’s Best Practices – Reserve Studies / Management manual published in 2007 as a guideline on how to perform a quality reserve fund study. Though this guideline is still relevant, things have changed with the new 2023 ‘Maintenance’ manual. No longer is a reserve fund study’s primary focus budgetary but rather future reserve fund studies should expand to incorporate both safety and preventive maintenance needs. As CAI states, CAI “…recognized need for greater clarity in the role of maintenance planning and programming in communities”.

Following the June 2021 tragedy in Surfside, Florida with the collapse of Champlain Towers South and the loss of 98 occupants, CAI commissioned a special committee of reserve fund experts contributing to the Condominium Safety Public Policy Report (October 2021). Among other points of emphasis was condo boards’ life-safety responsibilities and duties of loyalty and care. The special committee’s ‘Maintenance’ manual further recommends expanding typical reserve components to include preventative maintenance in future reserve fund planning as well as infrastructure inspections when warranted.

This is a departure from prior reserve fund guidelines where preventive maintenance and infrastructure inspections were not included or funded as reserve component line items. It is now recommended the judgement of the reserve study provider determines the inclusion of these types of component items when based on a degree of engineering certainty. It is further suggested the community’s historical pattern of maintenance expenses should be considered in determining if any of these expenses should be included in the reserve budget. Other historical reviews should include any work performed on the reserve components since the prior study was performed. In fact, all available service provider reports and information regarding the physical components should be reviewed.

What’s Included

While reserve studies will now reflect the board’s life-safety responsibilities, reserve studies will continue to evaluate information regarding the physical status and repair/ replacement cost of the association’s major common area components using component inventory, a condition assessment, and valuation estimates. Some of the new ‘Maintenance’ manual’s recommendations are subtle while others are not, such as decreasing the recommended period of site inspections from five to every three years.

Another significant recommendation is components are not restricted to physical items. This could include professional inspections, evaluations, or related building services when additional expert advice is needed, and an asset’s deterioration is in question. Therefore, common area preventive or corrective maintenance projects qualify as reserve components if they otherwise meet the definition of ‘component’. Thus, a reserve component is not required to be a cyclical replacement. Now a periodic structural inspection could be reserve component.

In the past component replacement was estimated as a ‘like kind’ of component. It is now recommended consideration should be given to logical upgrades to an existing asset or system now viewed as obsolete or inefficient in meeting the needs of the association. Judgement on these upgrades can be based on ongoing preventive maintenance costs and an evaluation of energy costs using higher efficiency equipment. Selection of components and their estimated useful life and remaining useful life may consider energy usage and ongoing maintenance costs with the resulting impact on total budgetary expenses and total life cycle costs.

Long-life components (i.e., > 30 years) have long been a subject of debate on their presentation in reserve studies. Often boards ignored long-life infrastructure components, hidden electrical and mechanical systems and their associated replacement costs. In effect, if the component’s replacement did not occur within the reserve study’s 30-year window, the study ignored future funding needs and kicked the can down the road for a future board to address. The new ‘Maintenance’ manual recommends long-life components should not be ignored but made visible in the study. Methodologies for reporting long-term projects include:

• Inclusion of long-life components with funding in the study.
• Addition of long-life components with funding at the time when they fall within the 30-year period from the date of study preparation.
• Identification of long-life components in the component inventory, even when they are not yet being funded in the 30-year funding plan.

Despite this new emphasis on preventive maintenance, it should always be remembered a reserve fund study is not a preventive maintenance plan, and a preventive maintenance plan is recommended for all associations. A quality reserve fund study is a path to avoid deferred maintenance; special assessments; lower property values; and liability exposure for all. This is a plan to meet the board’s primary mandate to ‘Maintain, Protect and Enhance.’

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

Q: Over the past few months, I’ve heard a lot of discussion about reserve studies and condition surveys. Are these the same, and, if not, how do they differ, and why and when should our association obtain one?

A: This is a great question because it is not asked often enough. I cannot count the number of times I have responded to a condominium board’s request for a meeting to discuss their stated need for a reserve fund study only to find they actually needed something else. That something else could encompass a wide range of engineering services such as a full structural evaluation; a water infiltration study; and/or a plumbing or electrical system update.

Condo and HOA boards have a lot on their agenda for their periodic meetings. Issues regarding landscaping, by-law enforcement, assessment collections to name a few, so the need to spend money to update their last reserve study is not a popular item. Even though the Community Associations Institute (CAI) and the association’s property manager may recommend a reserve budget update every three to five years, the board members are not eager to look at the calendar.

In fact, most discussions about updating the reserve budget arises from some perceived maintenance problem and not the calendar. Perhaps it is the rise in complaints in water stained ceilings from leaking roofs, or poor curb appeal of the aging building facades, or the developing potholes in the roadways that create the agenda item requiring capital repairs and the analysis of the reserve budget.

With the guidance of an experienced property manager or knowledgeable committee member, the board will recognize the benefit of hiring a professional engineer (PE) and reserve specialist (RS).  These professionals provide the most complete review of the facility’s common elements and will develop a reserve budget reflecting the future scope of repairs and associated cost estimates. With this understanding the board can prepare a Request for Proposal (RFP) and conduct interviews to hire a qualified firm—from there, things can start going wrong.

Common Misunderstanding

They go wrong because of miscommunication due to the lack of understanding of the industry’s language and terminology. Let us assume the condo’s primary concern is structural problems given the recent attention of the Surfside, Florida disaster. The communication problem starts with the engineer’s RFP interview during which the interviewee remarks to the board that one of the advantages of hiring an engineering firm to perform a reserve study is their structural engineers can comment on the potential structural distress issues found during the inspection of the building(s). This can be a point of communication disconnect and the beginning of unfulfilled client expectations.

In the engineer’s mind, he thought he was clear in telling the board his review of the structural elements would produce a report listing the structural problems found and the engineer’s recommendations of actions to be taken. What the members of the board may have heard was for the price of the reserve fund study they would receive an engineer’s structural evaluation of the condition of their facility with an estimate of repair costs to budget for their reserves and for a contractor.

A basic reserve study focuses on estimated remaining useful lives of existing common elements. When structural problems are known before or found during a reserve study, a condition study or assessment is needed to determine the soundness of the facility. This scope of work can be added to the reserve fund study or provided as a separate task. This study may call for inspection, material testing, engineering calculations, and more that are outside the scope of a reserve study. To avoid this, better questions and answers are needed on all sides of the issue.

Article written by Jack Carr, P.E., R.S., LEED-AP, Criterium Engineers
Published in Condo Media December 2021 edition
Download a PDF Version of this Condo Media article

Fear, Uncertainty, and Doubt

Condo association unit owners’ meetings can be a challenge. Boards often need to make hard decisions. People can become very emotional when it comes to issues affecting their money and they feel a lack of control. From what I hear the New England meetings I attend are mild compared to the ones seen on You Tube or those described by our Florida associates where the guards wear Kevlar vests.

When Alan Mooney, PE, RS, and I were invited years ago to be speakers at Community Association Institute’s (CAI) National Conference held in New Orleans, we decided rather than plow through a tedious power point speech; we would use the case method style format. Our presentation would show how tough issues should be managed in condominium meetings by using actual events to illustrate the points we wanted to cover. The following are some of the highlights of two of these case studies.

In “Get the FUD off the Table” we discussed the methods of dealing with the classic condo curmudgeon who tries to disrupt every meeting with negativism and other disruptive tactics to postpone or avoid any decision that may create change or spend money. I refer to this as throwing FUD on the table. FUD as in Fear, Uncertainty, and Doubt.

Of course, the best method of controlling this type of behavior is to not lose control of the meeting. This requires discipline and training. They do not teach effective condo board management in school. It is often a learn-on-the-job type of education. I have always admired CAI’s role in training both board members and property managers in the art of meetings. Condos are not businesses, but they should be run in a business-like manner.

In This Together

The first step in meeting control is to maintain a system of consistent rules and policies. Having a prepared agenda is key to setting the tone of a meeting. It establishes a chart to navigate through the presentation of issues, orderly discussions, and framework for the decision process. Educating meeting attendees on how motions are made and seconded, time limits on discussions, and voting rules goes a long way in creating an environment for a successful meeting. A written policy statement handed out to all attendees is helpful as people have a tough time arguing with a piece of paper rather than a real person.

A wise board will be open to innovative ideas from all sources but will have the means to control the condo commando who wants to take over the session. Boards often set up Homeowner Forums of ½ to 1 hour at the front or end of a meeting with strict time limits for each speaker. A well-prepared board will have the facts and answers that will sweep the FUD off the table.

The second case study was called “Don’t Hang Out Your Dirty Laundry”. Associations often must face difficult problems and make hard decisions. Perhaps it has just been determined that all the exterior siding or roofs must be resurfaced. Or the plumber just advised the board that all the heat system piping in a 12-story high-rise must be replaced. When the initial sticker shock hits and the specter of a hefty special assessment soon is realized, unit owners begin to panic.

It is at this time firm leadership needs to step up and remind everyone they are all in it together and whether they know their neighbor or not they are all in a sense a family and as a family they must keep their family business within the family. This means one does not tell the hairdresser about the roof leaking, or the butcher about the siding falling off, or even the brother-in-law about the pipe failure. This is critical because when the hairdresser passes the rumor on no one in the association would recognize the story by the third iteration.

Today’s real estate world is much more in tune with condos in distress from either recent foreclosures or underfunded reserve funds. Disclosures should be made in an orderly way with a timely reserve funding plan in place.

These problems are not solved by hanging out the laundry but rather recognizing the problem and establishing a plan to fix it. A plan of action must be in place to allow the community of unit owners to feel confident their equity will be protected and by joining together their goals will be met.

Though these two cases have different stories they have a consistent theme. When the FUD hits the fan…run at the fan. A successful association will have a board prepared to deal with a difficult future and the rules to guide and the sense to follow.

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

Conventional pool safety measures, including covers, perimeter fences, and subsurface alarms, can prevent unauthorized access when a pool is closed. However, these measures do not protect against drowning when a pool is in use. Lifeguards, swimming lessons, and parental supervision have traditionally served as the primary safety measures during swim time, but tragically, even these are not always sufficient.

According to the National Drowning Prevention Alliance (NDPA), 88% of child drownings occur with at least one adult present. This statistic highlights a significant gap in protection when a pool is open, especially in crowded pool environments. Even the most experienced lifeguards can experience fatigue and have a limited field of view. This is where Drowning Detection Systems come in. These systems monitor pools via underwater cameras and are available in both passive and active versions.

Passive systems feed continuous images to lifeguards on duty, allowing for easier and quicker identification of potential incidents below the surface. Active systems use Computer Vision to feed images into an AI model. These systems can recognize potential drowning victims, such as when a pool user has been submerged for an extended period, and automatically alert lifeguards if intervention is necessary.

The American Society for Testing and Materials (ASTM) has created the first-ever standard for active systems: ASTM F3698-24 – Standard Specification for Computer-vision Drowning Detection Systems for Residential Swimming Pools. This standard sets minimum performance thresholds and requires indicators for low-visibility situations, ensuring systems alert lifeguards within 30 seconds of detecting drowning behavior.

“This is an interesting use of Artificial Intelligence for added safety,” said Criterium Senior Engineer, Ralph Manglass, P.E. “While very useful, drowning detection systems are not a substitute for access control measures such as fencing, gates, etc., and for trained monitoring personnel such as lifeguards.” Widespread adoption has yet to develop, mostly due to cost and awareness, but with F3698 established, the hope is that more manufacturers will create these systems, leading to more installations, fewer drownings, and more lives saved.

Annual site inspections are a part of a regular maintenance plan for any Homeowners Association Community and can ensure the safety and structural integrity of your pool and its protective devices. To learn more about the services Criterium Engineers can provide your community, click the button below.

Over the last twenty years I have had the privilege of meeting with many condominium and HOA boards and leaders. Some were seasoned and experienced while others were new and exposed to the culture of community living for the first time. All wanted to do their best, yet failings and mistakes were acknowledged. With the hope of being forewarned is being forearmed, I thought I would share with you some of my observations of the ten most common condo board mistakes to avoid future do overs.

Not Understanding the Governing Documents: It is so basic. New board members are asked to read all the governing documents, but long-time members should also periodically review the association’s rules and regulations, especially when an important matter is to be considered. And of course, the corollary to this recommendation is these governing documents must be consistently followed and fairly administered. Erratic enforcement of the rules will never foster harmony in the community.

No Confidence in Your Management Company: This problem can be avoided from the start by hiring the right firm for your community. Interview the best candidates; ensure their proposed scope of services meets the specific needs of your community; and periodically review the selected firm’s performance and share your concerns. Once the board sets the goals and policies it should step aside and let the management firm enforce them without micromanaging the daily operations.

Not Maintaining Accurate and Timely Financial Statements: Loss of control over your financial statements is a guaranteed path to chaos in the community’s future. Good financial statements promote confidence amongst the unit owners; good relationships with your bankers and insurance representatives; and accurate information for reserve and operational planning and budgets. Up to date financial information is the engine driving revenue collections; trouble-free payables; and payroll processing.

Unreliable Reserve Fund Studies: If your reserve fund study is over seven years old, it is almost useless. Having the study sitting in someone’s bottom drawer and not referring to in that time is almost worse. Reserve studies are living documents whose basis is always changing. Construction and repair costs have skyrocketed. Inflation over the last two years has made most budgetary schedules obsolete and underfunded. A board does not want to be in the position of releasing the start of a major project only to discover more money needs to be raised.

Contribution Shortfalls to the Reserve Fund: The source of this problem is a failure within the management team. Either your accountant has not billed the proper assessments; your engineer has not estimated the necessary capital repair budget; or your property management firm has allowed deferred maintenance to get out of hand. Underfunded reserve budgets can damage the community’s image; impact unit owners’ future sale plans; and require future special assessments. The board is ultimately responsible for maintaining adequate operational and reserve fund balances. Not facing the need to raise assessments or delaying the decisions for necessary capital expenditures are classic board mistakes.

Communication Failures: Condo communities not only must be transparent in their communications with the unit owners but must be perceived to be transparent. Confidence in the board is built over time and will be called upon when difficult decisions need to be made. When everyone has the same set of facts, common decisions are much more likely. Today the media to get the word out is vast including bulletin board postings; community websites; email bursts; postal flyers; texting; etc. A well-run community has its members fully engaged as much as possible. Good and bad news should be dealt with on a timely basis. The community motto should be: “When it hits the fan, run at the fan.”

Uninformed Team Members: We Yankees like to fix things ourselves. However, in community living this can get a board in trouble. When a problem arises, there may be a tendency to save some money by not calling the condo’s lawyer, engineer, or insurance agent. The other Yankee saying is ‘penny wise and pound foolish’. If a liability issue arises or a conflict over the interpretation of a bylaw phrase, a quick phone call to your condo attorney might avoid unpleasant future consequences. The same is true for building safety issues or the discovery of water infiltration in the condo complex. Building problems rarely improve on their own.

Board Disunity: Disagreement among board members is bound to happen. Everyone’ opinion matters but everyone can’t be right all the time. The board members must follow established decision-making protocols and once a decision has been made each board member must stand behind the consensus. Anger and lack of respect have no place in community governance.

Not Following the Chain of Command: In general board members and committee chairs want to do the right thing. Sometimes in their enthusiasm to get things done in a timely manner they may take matters into their own hands and act without authority. Condo leaders must be reminded from time to time that they are dealing with community money, and they should not direct on-site contractors and vendors to supply services or make repairs without specific direction from the board. This type of lack of discipline can create unnecessary liability or costs easily avoided.

Improper Vendor Selection: Perceived vender service dissatisfaction is often the reason for a new member joining the board. All should be reminded before terminating a vendor service an exit interview should be held to determine all the facts. With a bit of due diligence, the true problem can be revealed resulting in better service with less trouble.

Community living require forbearance and respect for volunteer efforts. All things are possible with village unity.

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

Emergency Response Plan

You don’t have to be a weatherman to notice storms are more frequent and fierce. Nor do you have to be a news broadcaster to recall all of the reported residential damage from fire, floods, and wind. Nor do you have to be an accountant to recognize the cost of building repairs are skyrocketing up. What you do have to do is …be prepared.

Being prepared means your community has an Emergency Response Plan (ERP) in place. Disaster planning is all about saving lives; reducing suffering; and minimizing damage. These ERP plans are a group of strategies to protect both community members and their property. Key elements of the plan are Mitigation; Preparedness; Response; and Recovery:

• Mitigation includes identifying threats and eliminating potential danger with preventative maintenance to reduce vulnerabilities.
• Preparedness requires well documented and trained evacuation routes; established muster points; and a system to account for everyone with an emergency contact system.
• Successful Response in an emergency is greatly improved with a quick and decisive response requiring knowing the location of the key shut-off valves and safety features both within and outside of the units. It also includes updated lists of qualified repair contractors.
• The Recovery element of post-disaster management is often overlooked yet vital to the overall success of the community’s future. Recovery is not simply the clean-up after the disaster but a pro-active real estate marketing plan.  Whether the disaster issue is a simple sprinkler pipe leak causing flooding and mold in an empty unit or a fire destroying a wing of a complex; the planning is critical knowing what should be done after the final repair contractor’s truck is off the site.

ERP Planning Steps

So how do you start? The board should create and appoint a disaster team made up at a minimum a member of the property management staff and a board member. Residents with skills in insurance; legal matters; electrical systems; HVAC; plumbing; emergency response should be sought to join the team. There are many sources for general outline for an ERP. Your insurance company may have pre-prepared templates of these types of plans for easy customization for your community’s needs. This is very important as we all know every condo community is unique in its own way. High-rise communities will require a more detailed evacuation plan than a community with duplexes or townhouses. Urban condominiums will have different needs than rural or suburban communities. Amenities, special equipment, and landscaping may be important issues in the ERP. Demographics must always be considered as a community of young professionals may not present the same safety challenges as an association with a more senior population.

The written plan needs to be approved by the board. The plan should be easy to access in multiple locations. It should be periodically reviewed and rehearsed. A good plan will have a checklist of steps to be taken; procedures to follow; and basic supplies to have on hand. Your insurance carrier or property manager may also be able to provide disaster training guidance and other resources. Just ask. You may also want to consider seeking training grants or funding through CERT (Community Emergency Response Training).

The basic Emergency Response Plan outline should consider the following:

1. Assessment of disaster risks – both experience and potential
2. Planning – budget and financing
3. Property management coordination
4. Safeguarding important condo documents
5. Ledger of assets – written and digital
6. Communication plan – elderly and special needs; absentees; etc
7. Emergency equipment available – condo and resident owned
8. Lines of authority
9. Evacuation plan
10. Insurance audit
11. Vendor and contractor call list
12. Recovery plan

Future storms will not reduce in intensity. Weather related power outages will increase. Unit owners are becoming more reliant on reliable power for medical safety, home business needs, and family education. If emergency power sources are not currently available, the association should consider how emergency generators might be introduced into the community. Providing suggestions for unit owners’ personal protection during severe weather events can be in the ERP including recommendations for maintaining an inventory of flashlights; batteries; charged phones; a supply of food; and medical supplies/ prescription drug availability.

Post-Disaster Market Value Perception

The common denominator need of all condo unit owners is protection of their net worth. Therefore, it must be repeated, after any disaster, the impact on market value and sale potential must be considered. It should never be assumed just because everything has been brought back to ‘as good as it was’ before the disaster, that the real estate market perceives this to be the case. The association may need to take very positive steps to approach the local real estate professionals to clearly demonstrate the physical state of the current condo complex. This could include certified inspection reports or lab test results or whatever it takes to make market perception the reality.