Condo Media - November 2009 - 40

MANAGEMENT by Patricia Brawley, CMCA, AMS, PCAM End of Life Issues Make the Grieving Process Easier he end of the expected useful life of common elements in the community can be traumatic to trustees, unit owners, staff members and management, especially when there is no formal capital replacement plan. When major building elements must be replaced, the special assessment letters that go out to unit owners are seldom anticipated. One of the most difficult challenges that community associations face is dealing with physical obsolescence. Communities that are 30 to 40 years old are struggling with this deteriorating condition of physical elements and equipment. Regardless of the quality of management and the maintenance program that has been implemented, the time ultimately arrives when good money is being wasted on repairs, or when repairs are no longer an option, and replacements must be made. How communities come to terms with these end of life issues of building systems and equipment with their often overwhelming costs can be likened to the five stages that Elisabeth KublerRoss describes in her book “Death and Dying,” which include denial, anger, bargaining, depression and acceptance. Knowing that the community will inevitably experience these stages can make it easier for trustees and managers to work through to a more successful resolution. T Denial For many associations, focused on operational costs in earlier years, not enough attention has been given to saving for future replacements. Although state regulations may require trustees to exercise responsibility in carrying out their fiduciary duties, there is often pressure from unit owners to keep fees low or to maintain marketability by limiting budget increases to stay competitive with other communities. Faced with increases in the annual cost of services, reducing the contributions to long-term capital needs (i.e., the replacement reserve) has often been the path of least resistance to hold off fee increases. As a result, when a major system is at the end of its useful life, there are no association funds available to replace it. Without cash in the reserve fund, unit owners must bear the cost of these replacements out of pocket. When the trustees insist on burying their heads in the sand, it is difficult for the manager to help them to recognize the need to strategize for future major replacements. Dealing with attitudes like “If it ain’t broke, don’t fix it” and “Just put a Band-Aid on it” make the manager’s job more difficult. If the manager can remember that this is a stage in the process of coming to terms with the replacement, it will allow them to remain objective and not take the board’s denial personally. The manager must provide in-depth information to the trustees about the aging equipment and allow enough opportunity for the information to be absorbed. Repetition and familiarity make it easier for the board to understand the importance of the replacement and to prioritize its undertaking. Commissioning and using a condition survey and capital replacement plan for the association establishes a framework for planning for the common elements and guides reserve funding goals. But equally important is the communication of the plan to unit owners so they can appreciate the physical needs of the property over the long-term. Presentation of the capital plan by an outside independent expert, usually the engineering firm that helped to create it, at a special meeting is often effective in convincing unit owners of the necessity of reserve funding. Anger As condominium communities approach middle-age, trustees are faced with making hard decisions. The manager is most often tasked with being the bearer of the bad news of system failures and coping with trustee and unit owner anger. Sometimes the board suffers a lapse of memory with respect to previous warnings about end of life issues and seeks someone to blame for the failure. They know there is nothing that makes unit owners angrier than receiving a notice of a special assessment and will go to great lengths to avoid approving them. Unfortunately, when associations don’t have a replacement plan or don’t properly fund reserves, a special assessment or budget change for capital projects becomes a necessity. Much of the anger that unit owners feel comes from lack of knowledge and understanding of the facts of the situation. Providing them with written information about the capital needs of the association, whether they read it or not, allows them to consider the issues and become comfortable with them. The board can distribute copies of the capital needs study or similar report or provide a presentation to keep unit owners in the know. The board or manager should explain how increasing fees by a small amount annually to build up the reserve fund, instead of CONDO MEDIA • NOVEMBER 2009

Condo Media - November 2009

Table of Contents for the Digital Edition of Condo Media - November 2009