Condo Media - December 2020 - 21

" The longer the pandemic
persists, the greater the
financial pressures on rental
property owners and the
greater the likelihood that
at least some community
associations will have to deal
with the financial fallout. "
retired from Criterium Engineers,
observes. " You're lucky if you can even
get a contractor to return your call. "
Boards anticipating what used to be a
" normal " construction schedule will have
to adjust those expectations, Carr suggests. They will also have to adjust their
cost assumptions. Pandemic-induced
interruptions in supply chains are causing rapid and unpredictable increases
in the cost of building materials, Carr
says. As a result, " contractors aren't accepting fixed-price jobs anymore. " Most
are insisting on " cost-plus " contracts or
other arrangements that protect them
from rising costs. Boards will have to
build additional " fudge factors " into their
cost projections, as well, Carr suggests.
" Look at the world without rose-colored
glasses, " he advises boards. " Assume that
whatever something would have cost
two years ago is going to cost more today.
Take the fudge factor you would normally build into a construction project
and add 10 percent on top of that. "
DEALING WITH UNCERTAINTY
Uncertainty about future costs creates
risks, Carr notes, and boards have to

manage those risks by anticipating how
they will respond. " Boards should play
'what if,' " he suggests. " If the price of the
project increases by 20 percent, how
will you cover that increase? Where will
you get the additional funding? " Boards
need to develop a plan B - and maybe
plans C and D - considering strategies
for dealing with different scenarios. For
example, Carr asks: " Can you adjust the
scope of the work if necessary? Are there
components of the project that can be
eliminated or altered? Are there design
features that can be changed? Maybe
you don't need the most expensive siding
or the most expensive roofing shingles. "
Boards that are planning to replace
the siding on all the buildings in their
community may decide to do that
work in phases instead, Carr suggests.
Alternatively, they may decide to complete the work as quickly as possible,
even if it isn't critical, anticipating that
costs will continue to rise. These are
individual decisions boards must make,
Carr says, based on the nature of (and
need for) the work, on the financial
condition of their communities and the
financial resources available to them.

Reserve funding strategies should be
evaluated - or re-evaluated - in the same
way, he suggests, factoring in the risks
created by an uncertain financial outlook.
Boards must continue to make regular
contributions to their reserve funds,
Carr emphasizes, but there are ways to
ease the impact on strained association
budgets. For example, he suggests, boards
should ask the professional who prepared
their reserve study to review the assumptions about when critical components
must be replaced. Although the estimated
useful life of architectural shingled roofs
may be 25 years, that doesn't mean all the
roofs in a complex will age at the same
rate and have to be replaced in the 25th
year, Carr points out. An inspection will
identify exactly where the roofs are in the
aging process. Based on that review, he
explains, " you may be able to add four or
five years " to the replacement schedule,
reducing somewhat the near-term reserve funding requirements. " The world
may look very different 18 months from
now, " Carr says. " I'm not saying everything will be rosy then. But the pandemic
is an [anomaly]; you don't have to base all
of your long-term planning around it. "
December 2020 CONDOMEDIA

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Condo Media - December 2020

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