By Anastasia Kolodzik, PRA, RSS, CAM / Published August 2023
With new and evolving laws and requirements in reserve studies, this past year has been a whirlwind. There are many association managers and board members who have produced several questions. So let’s take the requirements piece by piece.
The introduction to structural integrity reserve studies (SIRS) has produced new challenges. Most associations were blindsided by the new requirements and have since been scrambling to meet the deadlines. Then came the glitch bill, lovingly dubbed SB 154, that had hopes of extended timelines, less stringent rules, and hopes of a brighter outlook. This bill made some changes but kept the majority of the procedures in place. Actually, this bill made SIRS, by definition, more important than ever.
First, let’s look at the qualifications for a structural integrity reserve study. Any association that was in operation on or before July 1, 2022, is a qualifier. This means that even if your building or buildings were recently built, as long as they are under this timeframe, they must obtain a structural integrity reserve study. It also mandated that residential buildings three stories or higher fall under this requirement. For example, even if the bottom or first floor is a garage, with a townhome (two-stories with interior stairs) above, this is considered a residential three-story structure. There have been many different discussions pertaining to this, and it has been determined these buildings are considered under the law.
Once you have determined your association needs a SIRS, the list of components comes into play. The new law has a specific list of which items are to be included: the roof, exterior painting and waterproofing, electrical systems, fire systems, plumbing systems, doors and windows, load-bearing walls and building structural support, and any other item that negatively affects the building if not maintained/ replaced or negatively affects the above items. These items have always been part of the reserve study in some form, only now they are showcased in their own component lines. All these items must be in the study and fully funded. The question has been raised as to exactly what full funding is. For example, the roof has a 10-year life, and in 2023 it is five-years old and will cost $100,000 to replace. Assuming the balance in the roof line item is $50,000, then that roof line is fully funded. Every structural item must be fully funded by January 1, 2025. This seems like a big jump in association dues. However, being fully funded is of paramount importance to ward off special assessments and falling property values and to expand mortgage options. Most associations will experience a period of “catch up” but will prevail in the future.
Now let’s discuss the items. The most talked about item is windows and doors. This line simply means to include the common doors and windows. For example, lobby and corridor windows are considered common elements and would be included in the study. Utility, entrance, and stairway doors would also be included as common elements. Unit doors and windows would only be included if they are the responsibility of the association. Time to get the documents out and read! If your documents deem the unit doors and windows are the association’s responsibility, they must be included and fully funded also.
Next, we look at the electrical, plumbing, and fire systems. Most associations are under contract on the fire systems, so this line is usually minimal. Electrical and plumbing are based on historical values or known upcoming project needs. This is especially true for older buildings. Some associations will choose to have thermography or infrared inspections to support the health or compromised fixtures in their building.
Roofing, exterior painting, and waterproofing have always been some of the most expensive projects for associations. It is no different in these current times. These items will continue to be the backbone of all association expenditure planning and will now be settled into the structural integrity reserve study component list.
The most expensive and probably the most important is load-bearing walls and support structures. The previous law included foundations. However, after many arguments and much discussion, the foundation requirement was removed. Presently, load-bearing walls and support structures are equal to building restoration projects. Any association of age has been through at least one, if not several, restoration projects. These will now be addressed on a regular basis according to the structural integrity reserve study.
Now that we know what the study includes, we need to know how often it needs to be done. According to the requirements, a SIRS must be performed every 10 years. However, reserving the projected amount over a 10-year period without any updates can prove disastrous. As of now, our economy is in a whirlwind. No one can say when or if inflation and construction costs will be reduced. This is exactly why having annual updates on all required studies is highly recommended. Any board member will agree, using 2013 costs in 2023 would not be the greatest of strategies.
On to some more requirements. Structural funds cannot be commingled with non-structural funds. For example, you cannot move $50,000 from the pool resurface line to the roofing line and vice versa even if you are using a threshold method. The requirement for full funding, in theory, makes this impossible. Associations under SB 4-D and SB 154 can no longer waive reserves as well. Waiving reserves on nonstructural items such as pool resurfacing and clubhouse bathroom repairs can diminish the aesthetics and therefore lower the appeal and value of your condominium units.
Many associations that are required to perform a structural integrity reserve study will allow traditional reserve studies to fall by the wayside. This may also negatively affect the process of repair and replacement of key features of the association. A best practice is to consider annual updates of both studies before each coming year’s budget formulation. This will produce a financially healthy and well-cared-for investment.
Anastasia Kolodzik, President
Expert Reserve Services Inc.
Anastasia Kolodzik is president and oversees the reserve study department of Expert Reserve Services, which is a Florida-based, family-owned and -operated company serving all 67 counties. Anastasia works closely with board members and association managers and recognizes this as the key ingredient to preparing a proper reserve study. She has been certified by the State of Florida to teach reserve studies continuing education to community association managers. For more information, call (386) 677-8886, email firstname.lastname@example.org, or visit www.expertreserveservices.com.