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Removal of just one item from Perpetual Item list of Reserve study

We have had reserve studies done over the years that all included about a dozen perpetual items. One line item was found to be controversial as to whether or not it should have been included. Now, the majority of the community and Board alike both wish to remove that item from the perpetual item list for use in future reserve studies. Can the Board simply do a unanimous board directive so that that particular line item is removed from this day forward? If not, how does the Board honor the wishes of the community and get rid of this particular line item from the perpetual list? We’d prefer to avoid the cost of re-doing another reserve study simply to remove one line item. Thank you for the favor of your reply.

1 Response

  1. dennisl

    Fish,
    Great question. Far too many people believe that reserve studies are sacred documents that ties the hands of board members and the community. They are nothing but tools for the board to use to establish the long term maintenance requirements for the community. The responsibility is the boards and the board’s alone with the input and consultation from the community. Reserve study consultants provide pretty packaging and projections of current and future cost of repairs but their reports are only as good as the input they put into the calculations. Formal reserve studies should be used by boards and associations as a starting point for creating the associations long term plans. They are not rocket science. The board and community is totally free to accept the formal reserve study report or to make any modification that they believe is more appropriate for the community, including the funding and timing plan for each and every item. The people best positioned to understand the capabilities, and desires of the community are the community boards and the community members. Make the long term plan a community plan not some report from a contractor that charged you thousand’s of dollars to generate. The important thing to remember when building these long term plans is to have available money in hand when any single item is due to be completed. Do not get tied up with the industry term of % funded that is nothing but hocus pocus and totally meaningless. The only thing that is important is that your funding plan makes sure that your spending plan is always covered with the money in the reserve fund. To do that for my community I simply built an excel spreadsheet that ran out 40 years that I kept current with actual expenditures and actual contributions to the reserve fund every year. By doing this you don’t have to redo the reserve study ever, unless to add some new item to the mix.

    So to your specific question yes the board is totally free by a majority vote to add or delete any item to the long term maintenance plan for the community. There are absolutely no state laws that affect the decision of the board relative to they long term maintenance plan, other than they have a fiduciary duty to the community to make that plan substantive and real and to live by the plan that they adopt. Adding items to the plan without consideration on how it will be funded is simply irresponsible, the same with not providing the reserve fund with sufficient resources to fund the expected expenditures in the plan both of these examples would be a breach of the fiduciary duty of the association board to the community.

    Dennis

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