Your HOA Has Plenty of Reports. That May Be Part of the Problem.
If you sit on the board of a self managed HOA, you probably have more information about your property than you realize. There is a reserve study somewhere. You have budgets and financial statements. Somebody has the inspection report. There are invoices for roof repairs, plumbing repairs and whatever happened to the gate last year. The insurance broker has been asking questions. A contractor gave the board a proposal two years ago that everyone thought was too expensive. And there is usually at least one former board member who remembers everything perfectly, provided you can get them on the phone. So the problem is not always a lack of information. The problem is that the information is scattered all over the place, and nobody is looking at what it says together. That is becoming a larger problem for California associations, because the buildings are older, the projects are larger, construction costs are higher, and insurers and lenders are paying closer attention to what is happening physically and financially at the property. A reserve study can be right, an inspection report can be right, the budget can be right, and the insurance broker can be right, and the association can still be heading toward trouble. Here is a simple example. Say the reserve study shows five years of remaining life on the roof. No panic there. But over the last eighteen months there have been three leaks, and the roofer has been out twice. A board member knows there was another leak before that, but nobody can find the invoice. Replacement was discussed a couple of years ago and pushed out, and the reserve balance is not quite where the old plan expected it to be. Then the insurance company asks how old the roof is. Suddenly the question is not whether five years was right or wrong. The question is what all of this information is telling you now. That is the piece boards can miss. The reserve study lives in one place, repairs live somewhere else, and inspections live somewhere else again. Financial decisions are buried in meeting minutes, and the insurance correspondence is sitting in somebody's inbox. The property, unfortunately, does not care how you organized the folders. It experiences all of those things at once.
Think about a rope
A rope works because a lot of smaller strands carry the load together, and an association is not much different. You have the physical condition of the property, reserve funding, maintenance, inspections, board decisions, project planning, communication and execution. If one of those strands is weak, the others have to carry more. If several are weak at the same time, that is when a manageable project can turn into a pretty ugly problem.
Take that roof again. A roof replacement is expensive either way, and good planning does not magically turn an $800,000 project into $80,000. What good planning does is give you time. Time to confirm the scope, update the reserve plan and collect money gradually. Time to get real proposals, and time to talk to owners before everyone is standing in the clubhouse asking why they suddenly owe $15,000. That is the difference.
Boards that manage their own associations have an extra challenge
If you use a professional management company, there is usually somebody whose job includes keeping track of the history. Associations that manage themselves do not have that luxury. A board member moves, a treasurer steps down, or somebody who knew everything about the building gets tired of being the person who knows everything about the building. Then the new board inherits a shared drive full of documents with names like Roof Final, Roof Final 2, New Roof Final and USE THIS ONE. We have all been there.
The issue is not bad people or bad boards. It is turnover. The building keeps aging while the volunteers change. So one of the most useful things a board can do is preserve the important history. What was repaired? What was postponed? What did the engineer say? Did the condition of something change? Did an inspection uncover new work? Did the board decide not to follow a recommendation, and why? That history matters. It matters to the next board, and it matters to the next reserve study.
Your reserve study should help connect the dots
We do not think a reserve study should exist in isolation from everything else happening at the property. The numbers matter. Useful life, replacement costs and funding all matter. But context matters too. If something significant has changed since the last study, we want to know about it. If you replaced something, tell us. If something is failing faster than expected, tell us. If you are getting repeated leaks, send the repair history, and if an inspection raised a new issue, send the report. Do not worry about whether you are giving us too much information. We will sort through it. That is part of the job. A good reserve plan should not make a volunteer board feel like it has one more report to manage. It should take a lot of scattered information and help you understand where the association is headed. Sometimes the most important thing is not sitting neatly in one report. Sometimes the risk is in what the reports are saying together, and that is the part we do not want you to miss. If your association has a reserve study coming up, do not just send the last report. Tell us what has actually been happening at the property. We will help you build the plan from there.
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.
