Are you a board member of a condo, townhome or HOA community association? Or perhaps you are a homeowner serving on a capital improvements committee? One of the most important questions to ask is when to replace a capital item such as a hot water tank or a boiler heating system.
If your building doesn’t have a common hot water tank or a heating system, this article still applies to other types of capital equipment and HVAC systems. And even if you have a reserve study for your condo association, you should still have a basic understanding of the major mechanical systems in your association especially if you are serving on the board.
If you have a management company, they should have the answers to each of these questions readily available. If not, you might want to consider switching to another management company as this is one of the basic functions of a management company which is to assist the board of directors in the proactive replacement of capital equipment.
Here are the steps you should employ to determine when you should replace this system:
Before getting a quote, determine what is the best system for your type of association. There are different types of systems and configurations. Get a few opinions and determine which system and configuration is best for your association.
As a result, I will describe an alternative scenario which is one where the association does not have a reserve study or has an expired report. In this case, the board properly plans ahead by funding the reserves through assessments or special assessments so that when the time comes, the funds are available for the full replacement.
And the board understands that the system could have lasted another year or several more years but knows that it is much better to replace the system proactively rather than waiting for the system to fail and cause unnecessary stress and headaches to the board and homeowners. The other reason that this is the best-case scenario is that it typically will cost less to proactively bid out the system and replace it rather than wait for it to fail and then replace it on an emergency basis that usually ends up costing the association 10% to 50% more by doing so.
How proactive do you wish to run your association? Do you prefer to avoid unnecessary headaches and stress? Do you wish to avoid emergencies that cost the association thousands of dollars that could have been avoided? These are the questions you need to ask yourself and your fellow board of directors.