How to Avoid the HOA Meeting Nobody Wants to Have
There is a particular kind of HOA meeting that nobody wants to chair. You know the one. The room is full, people who have not attended a board meeting in six years have suddenly discovered parliamentary procedure, everyone is asking how this happened, and somewhere in the agenda is the phrase special assessment. If the number next to it has five digits, things tend to get lively.
Sometimes a large special assessment really is unavoidable. Buildings have emergencies, hidden conditions get discovered, and costs change. But a lot of expensive problems do not become expensive overnight. The signs may have been there for years, and the challenge for a volunteer board is knowing what to pay attention to before the situation becomes urgent. Here are seven questions worth asking.
1. What are our large projects over the next five years?
A thirty year reserve study is important, but start with the part of the plan you can actually see from where you are standing. What is coming in the next five years? Roof, painting, pavement, decks, plumbing, elevator, pool? Now take it one step further and ask what happens if two of those projects arrive at roughly the same time. That is when things get interesting. A good reserve study should show you not just the individual projects, but how the timing affects the association's finances. You do not want to discover in 2029 that the roof and siding have apparently scheduled themselves for the same summer.
2. Has anything changed since the study was done?
Reserve studies are based on the information available at the time. Then life happens. A leak starts, an inspection finds damage, a project gets postponed, or construction bids come in much higher than expected. Or maybe something lasts longer than expected and the association catches a break. When something significant changes, ask whether the reserve plan still makes sense. You do not necessarily need a complete overhaul every time a contractor visits the property, but you do not want to keep funding an old plan when the physical reality has moved on.
3. Are we repairing the same thing again and again?
Repeated repairs can be perfectly reasonable. They can also be a clue. If you are repairing the same roof area every year, or fixing the same plumbing problem over and over, at some point it is worth asking whether you are maintaining an asset or postponing a replacement. There is nothing wrong with postponing a project when it makes sense. There is something wrong with postponing it without realizing that is what you are doing. Your building will eventually send you the bill either way.
4. Are the physical plan and the financial plan still on speaking terms?
Let's say the reserve study assumed the roof would be replaced in seven years. Then the condition changes and now everyone agrees it should happen in four. Great, the physical plan has changed. Did the funding plan change too? If not, you now have two plans. One says the project is coming in four years, and the other is still saving for year seven. You can probably see where this story goes. The same problem happens when inspections identify new work, costs increase, projects get postponed or reserve contributions are reduced. The physical side and the financial side need to stay connected.
5. What are the insurance company and the lender seeing?
California HOA boards are dealing with a much tougher insurance environment than they did a few years ago. Carriers are asking more questions about roofs, electrical systems, deferred maintenance, inspections and other property conditions, and lenders also care about the physical and financial health of condominium projects. This is not just paperwork for the board. It can affect owners. Insurance availability, financing, refinancing and the ability to sell a unit all matter, which means taking care of the property and having a credible capital plan is part of protecting everybody's investment. It is not very glamorous, but neither is discovering that a buyer cannot get a loan three days before closing.
6. If your entire board disappeared tomorrow, would the next board understand the property?
Not disappeared disappeared. Let's keep this cheerful and say everybody sold their units and moved to Maui. Would the new board understand why you postponed the roof? Would they know there had been recurring leaks, what the engineer recommended, why the association borrowed money, or what was replaced last year and what it actually cost? This is one of the most persistent problems in associations that manage themselves. The volunteers change and the building does not. Important information has to survive the people who currently know it. Otherwise every new board spends its first year solving mysteries.
7. Can you explain the reserve plan to the owners without putting everyone to sleep?
This is a good test. Can your board explain, in normal English, what major projects are coming, what you are saving, roughly what they will cost and whether the plan appears to be working? You do not need every homeowner to understand reserve funding formulas, but they should be able to understand why they are paying into reserves. Telling owners that the reserve contribution is increasing because the roof replacement is approaching and current construction pricing is higher than the old estimate is a conversation. Telling them the association needs more money is an ambush. Owners usually handle difficult information better when they understand where it came from.
The reserve study is not the bad news
This is worth saying because we see boards avoid reserve planning for exactly this reason. They do not want to know. Nobody wants a report telling them they might need to raise assessments, and nobody wants to be the person who takes that recommendation back to the neighbors. But the study is not causing the expense. The project already exists. The study gives you time to deal with it, and time is incredibly valuable in reserve planning. If you know something five years ahead, you may be able to raise contributions gradually. You can get proposals, investigate the condition, sequence projects, communicate with owners and decide what matters most. When you find out at the last minute, the list of available options gets a lot shorter.
That is why we think reserve planning is a good thing. It is good for the property and for long term value, it puts the association in a better position with insurers and lenders, and it reduces surprises. And, if we are being practical, it can make serving on the board a whole lot less miserable. You do not need to predict every problem that will happen over the next thirty years. You just need to understand the property well enough to see the large projects coming and make adjustments when circumstances change. That is manageable, and if you have the right people helping you, you do not have to figure it all out yourself.
If your association has been avoiding its reserve study because you are worried about what you might find, that is probably the best reason to get started. Tell us what is going on. We will help you sort through it and build a plan you can actually use.
Erik Sundquist, RS, is the managing partner of SMA Reserves, LLC, and a seasoned reserve specialist with a background that spans construction, real estate development and community-association consulting.
