There are many reasons to commission or update a reserve study for your association. Reserve studies help you make a plan for your community to be financially viable well into the future. These plans can help you fund the association so that the community can adapt to economic fluctuations and trends in community living.
Reserve studies list the assets of the community, outline the life of the assets and estimate a cost to replace. They are used to establish appropriate amounts to allocate to a reserve fund on an annual basis for future projects.
Insurance carriers perform risk management surveys and the recommendations or requirements of these surveys can force associations to perform maintenance that may have been deferred by a Board in favor of a more desired project. Carriers look for all type of risks, but are primarily interested in the following updates as they are performed on the property:
- Roof replacements, maintenance and inspections
- Electrical upgrades
- Plumbing upgrades
- HVAC upgrades
Deferred maintenance is a leading cause of insurance claims. So get in front of the issues – know what they are and when your association plans to address them. 2017 tax reform allows tax incentives for businesses who are performing capital projects and reserve expenditures. Associations should talk to their accountants and auditors about what type of tax incentive is available if they perform large replacement or capital projects. Read more about the tax implications here.
Let the spring projects commence! Looking forward to a safe and happy season of updates and construction projects. Be Safe. Be Sure.