Structural integrity in high-rise communities has been a focus after the tragic partial collapse of Champlain Tower South condominium in Surfside, Fla., in June. CAI’s recently released Condominium Safety Public Policy Report details public policy recommendations that can provide solutions for legislators addressing high-rise building safety in their districts.

One of the two recommendations covers reserve studies and funding. Reserve studies are a planning tool to assist with budgeting for replacement or substantial repairs based on life cycle and not intended to evaluate existing building conditions or to specify corrective repairs. Many states have existing legislation requiring reserve studies or reserve funding for condominiums.

CAI believes the recommendations below should be considered for adoption into state law to support the existing statutory framework for the development, governance, and management of community associations.

According to the Foundation for Community Association Research’s Breaking Point: Examining Aging Infrastructure in Community Associations report, 80% of community association managers, board members, and service providers surveyed felt it was critical that their association have adequate reserves in the event of a major infrastructure failure or construction need.

A reserve study includes a physical review, a review of the community’s finances, and a recommendation plan made by a reserve analyst. CAI recommends statutorily mandating reserve studies and funding for all community associations. CAI’s public policy report helps communities prepare for and a timeframe to practically transition to these new requirements to avoid financial strain on homeowners and the association.

The Foundation’s Best Practices Report: Reserve Studies and Reserve Management provides excellent procedures pertaining to reserve planning and funding for homeowner leaders and community managers to put into practice immediately.

CAI supports legislation that mandates preliminary reserve studies (before or during the construction of a community) and again at the time of developer turnover to the community association that include major shared components for individual units or dwellings or significant infrastructure/site improvements (i.e., roads, street lighting, accessory buildings, etc.). CAI also supports legislation mandating periodic reserve studies for communities with significant infrastructure and/or shared components whose aggregate replacement costs exceed $10,000.

We support legislation that mandates disclosure of all reserve study findings in purchase and sale agreements when the community transitions from developer control (if applicable) and that also requires inclusion of reserve study findings and funding plans to any new buyers. Disclosure also should be mandated during the annual budgeting process and include a summary of reserve financial condition and the funding plan.

CAI supports a practical legislative process for community associations to comply with funding requirements. Communities need to maintain a certain amount of money in reserve funds, but it may not be feasible for some communities to immediately procure those funds. Therefore, CAI supports and recommends mandates for community associations to comply with any funding requirements resulting from reserve study legislation while still allowing communities to slowly catch up to that amount.

We oppose legislation that allows owners to waive and/or opt out of reserve funding requirements. CAI also opposes legislation that would prohibit including structural and/or engineering inspections by appropriate professionals and the financial impact of said inspections in the reserve study and funding plan. Finally, CAI opposes legislation that restricts the borrowing from reserves for other purposes.

Safety is the most important factor in any community. In the wake of any issue that would threaten the well-being of the community members or the association, CAI supports the ability of association boards to collect a special assessment and/or borrow funds without a membership vote to correct these issues.

These policy positions provide support to community association boards and urge them to follow the advice of professionals and strong best practices, especially in circumstances that are related to life, health, and safety. CAI continues to develop additional guidance and best practices for boards, their managers, building inspectors, developers, accountants, reserve analysts, and other stakeholders to address structural integrity.

Read CAI’s entire public policy on reserve studies and funding and review existing reserve laws in your state. Find more resources to protect your community at www.caionline.org/CondoSafety, including the entire Condominium Safety Public Policy Report.

>> Follow legislation related to reserves on CAI’s Legislative Tracking map.

Phoebe E. Neseth, Esq.

Phoebe E. Neseth, Esq.

Director of Government and Public Affairs and the College of Community Association Lawyers

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