Published in the ECHO Journal, August 2008
Question:
We are a four-member board of directors. All of us are professionals and this is our first home. What is considered “proper” property maintenance in a common interest development and how do we go about protecting our property and residents?
Answer:
Our answer this month comes from Dick Tippett, the president at ERTECH.
There are three basic purposes for doing maintenance on a property. The first purpose of property maintenance is to protect a community association from “life safety” threats in commonly held areas. Typical threats include:
- Roof leaks into units;
- Mold growth in units and on walls;
- Rot in building, balcony and walkway structures;
- Fence collapses;
- Trip-fall hazards, such as tilted sidewalks, slippery stairs, missing pool tiles and paving potholes;
- Tree damage to landscape and tree damage in the form of falling trees or tree limbs;
- Flooding due to clogged drains;
- Paving failures
- Broken pipes
The second purpose of property maintenance is to preserve the property held in common, the “common areas” belonging to the whole association. This includes the building structures, the landscaping, the hardscape (paving, sidewalks and driveways) and the recreation facilities.
The third purpose of property maintenance is to keep the property in good operating condition and to enhance the value of the property.
While the first two purposes consume the most amounts of money over the years, the third purpose is what makes your homes pleasant to live in day to day.
All of these assets require regular inspection and periodic maintenance or replacement. The cost of this maintenance or replacement must be accounted for in the association’s reserve report. Carefully check your reserve report to be sure that all such assets that are part of your association are included.
In order to get at least part of the maintenance managed, most boards establish committees to handle different facets of the work: architectural, landscape, reroofing and painting committees for example. A fifth committee, to oversee general maintenance, should be added to this list.
The general maintenance committee should be tasked with regularly inspecting and reporting on the needs and condition of such things as common area lighting, drainage, paving, sidewalks, fencing and security gates, pool and spa areas, tennis or sport courts, laundries, clubhouses, elevators, hallways (paint and carpets) and garages or carports, for example.
The maintenance committees should also check that the normal, ongoing weekly maintenance and “on-call” maintenance work is being properly done. This ongoing work should normally include:
- Replacing broken sprinkler heads and piping;
- Control of termites, ants, squirrels and landscape pests;
- Minor paving repairs or sidewalk grinding;
- Replacing burned out light bulbs;
- Pool cleaning;
- Common area laundry and restroom cleaning;
- Gutter and roof cleaning;
- Lawn mowing and fertilizing;
- Tree trimming, hedge trimming and leaf removal;
- Root pruning;
- Replacement of dead or overgrown landscaping;
- Pool and spa cleaning and filter cleaning;
- Community building cleaning;
- Cable TV or shared satellite dish maintenance.
Reserving For Capital Maintenance
California law requires that every three years associations prepare reports of what money will be required to maintain or replace capital common area items. The usual list includes roofing, paving, painting, waterproofing or decks and balconies, siding, plumbing and a host of other items. The report is also supposed to set forth the amounts that must yearly be set aside (reserved) for the replacement of repair of those components.
Ideally the report should show project funding needs based on a straight line depreciation formula. This method of calculation precludes a lot of financial sleight of hand. It is a calculation standard developed within and strongly supported by ECHO.
The reserve study should spell out the amount of money to be set aside for maintenance based on need and planning. It should not be a document that sets capital maintenance quality and schedules based on the unwillingness of board members to confront the discomfort of raising fees.
Specifically the reserve study should:
- Set forth the schedule for major maintenance work;
- Establish the amount of money required for annual capital maintenance;
- Establish the amount of money required for long-term capital maintenance and replacement;
- Be tailored to the specific needs of the association it is prepared for;
- Be based on actual physical measurement of the capital components it inventories and budgets for;
- Be annually funded by the association at the level set forth by the preparer.
Reserve Component Categories
There are five of these. They are, in no particular order:
- Cyclic Regular Components: These are tasks such as slurry sealing paving, painting the buildings and reroofing shake and shingle roofs that recur on a regular, predicable schedule.
- Cyclic Irregular Components: These are tasks such as repairing wood or waterproofing at walking decks and balconies, replacing flat roofs or tile roofs, replacing dead shrubbery and trees and rebuilding fences. We know that these tasks are repetitive but don’t really know if all roof/deck/fences will have to be done at one time, or even at regular intervals. One or two years before replacement of a major cyclic component is scheduled, it is wise to have that component inspected by a professional to see if replacement is actually required. You may be pleasantly surprised to learn that the component has several years useful life remaining.
- Predictable but Irregular Components: We know that water heaters will corrode, pool pumps will wear out, the pool interior will need to be coated, that termites will move in, unit interiors will be damaged by leaks, and that water lines will wear out. We just don’t know exactly when.
- Catastrophic Failure Component: There is almost never reserve for but should be. Catastrophic failures are frequently the result of maintenance too long deferred (see the section on board unwillingness to increase reserve assessment). Typical examples include; hydraulic elevator failures, trees blown down, balcony collapses/structural failures, and deductible or uninsured storm or earthquake damage.
- Outdated Design/Aesthetics Component: This also is an important reserve component. Properties that look the same as when they were built twenty-five years ago do not have the same resale value as fresh updated one. Examples here include paint color changes, landscaping makeovers, decorated clubhouse, a retiled pool, new entry signs and resurfaced tennis courts.
Reserves Are Not An Operating Budget
Reserve studies do not include the everyday costs of operating your association. These everyday costs typically include;
- Landscape maintenance, including lawn care, ground planting care and sprinkler maintenance;
- Water costs for irrigation;
- Electricity and bulbs for common area lighting;
- Drain cleaning and roof and gutter cleaning;
- Pool and spa maintenance and heating;
- Garbage collection and recycling;
- Security;
- Management company costs.
These costs go up annually, because the cost of doing business for each of these contractors goes up annually. Increased insurance, increased worker’s compensation and, particularly new this year, increased fuel costs all must be recovered somehow. There are only two ways to do this—decrease service either directly or by using lower-cost (and less skilled) employees and components, or increase prices.
The board needs to accept the reality of these annual cost increases and increase membership assessments accordingly. Decreasing the level of service costs more than it saves because it ultimately winds up depreciating the value of the property.
More importantly, capital reserve money should not be spent to cover shortfalls in funding everyday operation. All too often, the money spent in that manner isn’t put back in the reserve account.
Dick Tippett is the president of ERTECH Inc. one of the original condominium reconstruction management companies. He is a member of ECHO’s Board of Directors and former Chair of both the Maintenance and the Central Coast Resource Panels.