The Comprehensive Guide to Hiring a Landscaping Contractor for Community Associations. A Primer for Board Members of Condos, Townhomes, HOA’s and Cooperatives.
How to Increase Association Revenues Without Increasing Assessments. A Primer for Condo Association Board Members
How to Property Plan and Fund Large Scale Capital Projects. A Primer for Condo Association Board Members
Fund Large Scale Capital
Projects.
Proper planning and funding capital projects for condo association communities is crucial for maintaining property value and ensuring an enjoyable community living experience for the homeowners. Here are some of the best practices and approaches:
1. Reserve Studies:
o Consider hiring a company that specializes in reserve studies. These studies provide a detailed report on capital items, their life expectancy, replacement timelines, and associated costs.
o The report guides the association on which items need replacement and how much to save annually to fund these
replacements.
o These reports typically look 20-30 years into the future and are very detailed.
o While reserve studies are ideal, it might not make sense financially for smaller association as these studies typically
cost at least $3,000 to $4,000.
2. 5-Year Capital Plans:
o Regardless of whether you have a reserve study, it is essential to create a 5-year capital plan.
o If you have a reserve study, you should Incorporate that data into the capital plan.
o The capital plan should map out which capital items will be addressed in each calendar year along with the association
cost.
o By having an up-to-date capital plan, the board of directors can property fund and address project proactively and minimize the
amount of deferred maintenance and repairs.
3. Reserve Funds:
o Having sufficient reserves is critical to fund capital projects.
o Your budget should fund the reserves on an annual basis and at least 10% of your total annual income should go into your
reservices.
o Even with proper annual reserve funding, associations often times will need another source of funding to pay for large scale
projects.
4. Special Assessments:
o When an association does not have sufficient reservices, the board of directors will need to consider implementation of a
special assessment.
o A special assessment is a way to raise additional funds to pay for a project.
o The board will need to consider the amount of the special assessment and the duration of the special assessment before
approving it.
o It is extremely important that the board communicate well in advance of the passing of the special assessment at a board
meeting, so all the homeowners are informed well in advance.
o It might not be sufficient to only pass a special assessment, or it might not provide the funds fast enough. In these cases, the
board may consider securing a bank loan and passing a special assessment to pay back the loan.
5. Bank Loans/Financing:
o The board should consider taking out a loan if funds are needed in a relatively short amount of time.
o In addition, the other benefit of taking out a loan is that it allows the association to address multiple projects at once in a
relatively short period of time.
o There are costs associated with a loan. For example, there are the bank loan costs, the attorney fees, and management
company fees.
o As a result, it is recommended that the association address as many projects at once and extend the payment terms out as
long as possible to make the payback terms as affordable as possible for the homeowners.
o In some cases, associations will take out a loan even if they have sufficient reserves.
SUMMARY
It is critical for board members to plan ahead and proactively address capital projects. This approach will ensure cost savings for the association and will minimize the chances of needing costly emergency repairs. This will also ensure the homeowners will continue to have an enjoyable community living experience.
When additional funding is needed beyond the reserves, board members can either pass a special assessment or secure a bank loan that is paid back by a special assessment. The right approach will depend on how quickly the funds are needed to address the capital repairs.
About Chicago Property Services
If you’re a board member of a community association in the Chicago area, you may want to consider reaching out to Chicago Property Services for assistance with your landscaping needs. Chicago Property Services is Chicagoland's leading provider of community
management services for small to mid-sized condo, townhome, and homeowner associations, as well as cooperatives. They can help you hire a reserve study specialist and/or oversee your large scale capital project.
To request a management quote or to request a copy of the 2024 board planning guide, you can email Salvatore at ssciacca@chicagopropertyservices.com or call him at 312.455.0107 x102.
By working with a reputable and experienced community management company like Chicago Property Services, you can ensure that your community is well-maintained and enhances the homeowner community living experience.
