Several years ago the Washington legislature adopted reserve study laws to improve reserve funding levels at condominium and homeowner associations; however, those laws will take years before their intended effects are fully realized.  The unfortunate truth is that many associations must own up to years—even decades—of underfunding reserves coupled with time-sensitive major repairs and deferred maintenance that can no longer be deferred.  One of the most daunting scenarios for a community association board is when a major repair project can no longer be delayed, yet the association’s reserves are woefully underfunded. We commonly advise boards on how to strategize to complete these types of projects.  Here are a few tips that might help move your project forward:

Team Approach.  No board, regardless of directors’ past experience, is an expert in all of the areas and on all of the topics implicated by a repair project.  Even if directors have construction experience, a director’s duty of care practically requires consultation with construction and other experts when dealing with complex association matters.  For many boards, this process starts with recommendations and guidance from their manager. Others may find the wscai.org Service Providers list useful (https://wscai.org/member-benefits/service-providers/).  Service providers often essential to the process, and some of their common roles and duties, are:

• Professional Association Management (professional contacts and referrals assistance, communications with owners, meetings, project logistics, collections and accounting)

• Legal Counsel (governing document review and amendment, construction contract review, lender interface and document review, assessments, assistance with meetings and corporate formalities)

• Architect/Engineer (investigation plan development and analysis of findings, scope of repair development, assistance with bid package and bidding process, construction management, construction contracts)

• Contractor Services (puts hammer to nail--your architect should help with suggesting good contractors)

• Lenders (if your reserves are very low, you may need to borrow to finance repairs)

Timeframes.  A major construction project can often take up to a year or more in advance planning before construction begins.  An association may need to amend its documents to remove impediments or add powers necessary to smoothly undertake the project, which can take several months.  So can investigating your buildings, coordinating experts, obtaining financing, and holding association meetings to keep owners up to speed.  The bidding and contracting process takes time as well.  This all must be accomplished while attending to the day-to-day operations of the association.  In short, the process often takes longer than expected, so plan accordingly.

Funding.  In a perfect world, large-scale life cycle repair and replacement of deteriorated or damaged building components is paid for with reserves.  But when reserves are inadequate and repairs cannot wait, a special assessment may be necessary.  If the per-unit assessments will be so large that it would be a serious financial hardship for some owners if the assessment needed to be assessed and quickly collected, the board may want to consider financing the project through a loan with an association lender.  Financing allows an association to borrow the funds needed to complete repairs in the near term, while allowing the association to give owners an option of paying their share of the repair costs over time, with interest.  This can reduce the financial impact of the repair costs for some owners by providing time for owners to obtain their own financing or otherwise stay current on payments.  There are a handful of lenders and specialize in community association lending.  Under an Association loan, the association is the borrower and owners are assessed so that their payments enable the association to meet the payment obligation on the association loan.

Governance.  Depending on the nature of the project and needed repairs, the association’s governing documents will affect the process to varying degrees.  An association may be required to obtain owner approval for certain parts of a project or require that certain costs, such as those for limited common element repairs, must be assessed to the individual unit owners while other costs are common expenses.  Particular disclosures and either ratification (or an affirmative vote) may also be needed for the special assessments.  Good governance practices will also dictate that boards hold proper meetings, and make certain formal resolutions in support of project decisions such as borrowing funds, hiring contractors, entering construction contracts, and assessing owners.  You will also want your legal counsel to review your governing documents at the beginning of the project to identify any potential issues or needed amendments.

Informing Owners.  When asked what is the one characteristic of a successful project, our answer is “timely and meaningful communication with owners.”  You should plan to hold several informational association meetings during the process to inform owners of the challenges faced by the association, the plan the board has to deal with the problems, and progress that has been and is expected to be made.  These informational meetings are often in addition to required meetings to ratify a special assessment, financing or a repair plan depending on an association’s particular governing document requirements.

If a board is mindful of the above five topics and works with competent experts and consultants, major construction projects can be tackled with aplomb.  That is not to say it will be easy, but when buildings need major repairs, a measured, businesslike approach is the best way to get the job done right.