Budgeting

Reserve Studies Required Every Five Years for Condos/HOAs

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Reserve Studies Required Every Five Years for Condos/HOAs

Question: How often do Condo Associations and HOA/POAs need to conduct a Reserve Study?

Answer:

Virginia Requires New Studies Every Five Years

In light of the recent condo tragedy in Miami, I thought it would be a good time to remind everybody that Virginia requires Condominium Associations and Home Owner/Property Owner Associations to conduct a new Reserve Study at least once every five years.

In addition to providing valuable financial/budget guidance, Reserve Studies are also an important way to ensure your building/community remains in safe working order and structurally sound.

What is the Purpose of a Reserve Study?

During the Study, an engineer, or team of engineers, will inspect all common elements of the building/community to provide an assessment of current condition, useful life expectancy, and projected cost of repair/replacement. A building inspection includes everything from the elevators, to foundation, to hallway carpet.

After the inspection, the Study team will provide a detailed report of their findings and an assessment of the future financial needs of the Association over the next 30 years to maintain and replace the common elements of the building/community.

In most cases, these annual financial needs are analyzed against the current Reserve Balance (Association’s savings to pay for common maintenance and replacement costs) and the current Reserve Contribution amounts to determine if adjustments need to be made to the contribution levels in future budgets. Accelerating savings for an under-funded Reserve are one of the most common reasons Associations increase dues. If the funding requirement is high enough and the repair/replacement needs are urgent, that is when Associations will consider charging a Special Assessment to fund the Reserves immediately.

Don’t Forget About Presentation

I have reviewed tons of Reserve Study reports over the years and there is a wide range in quality. In my opinion, a quality report should not only be incredibly detailed in the inspection findings, but also as detailed in the presentation of the financial projections/recommendations. It’s also critical that this information be presented in an organized and easily understood format, which is not an easy feat when dealing so much information. If you are helping your Association choose a company to lead the Reserve Study, don’t forget to review reports they’ve produced for other communities so you can see how well they present their findings.

Important for New Buyers Too

In addition to Reserve Studies being important for building maintenance and budgeting, every new Buyer into your community will receive a copy of the Reserve Study (along with a other Association documents) once they’re under contract and has a three-day review period in which time they can void the contract for a refund of their deposit. So having a current and easily understood Reserve Study report is also a critical part of keeping Buyers under contract and the resale market in your community from under-performing.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.Reserve Studies Required Every Five Years for Condos/HOAs

How Much Are Condo Fees In Arlington?

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How Much Are Condo Fees In Arlington?

Question: Our Board of Directors is planning for the 2020 budget and we’d like to get a sense of the market rates in Arlington, particularly in the Rosslyn-Ballston Corridor. What are the average condo fees in the Arlington area on a cost per square foot basis?

Answer: It’s that time of year for most Condo Associations – budget planning time! As a former Condo Board Treasurer, I understand the pressure you’re under to balance responsible spending and reserve contributions with resident expectations of low, stable fees. Let’s take a look at what condo fees are across Arlington…

Arlington Condo Fee Rates

Fees are generally set on an annual basis by dividing up the Association’s total budget, including reserve contributions, by the ownership percentage assigned to each unit. Ownership percentage is determined by the builder and can be found in the legal documents you received prior to purchase. In most cases, it’s determined either by the number of bedrooms or square feet.

On a square foot basis, the average condo fee in Arlington is $0.54/sqft with a median fee of $0.53/sqft. Along the Rosslyn-Ballston Corridor the average jumps a bit to $0.57/sqft and the median remains the same.

On a per bedroom basis:
Bedrooms Average Fee Median Fee Average R-B Corridor
0 $319 $380 $306
1 $436 $470 $443
2 $575 $471 $631
3 $976 $505 $1,093

Not All Fees Created Equal

Before you jump to any conclusions about the relative value of your condo fee, you need to consider what’s included.

Amenities that require staffing and/or expensive maintenance like an attended front-desk, on-site management, and pools add significantly to the budget. The value for those amenities is subjective. Amenities that take up a significant amount of space within a building like large lobbies, party rooms, or rooftop gyms take away from the total unit count, thus increasing the ownership percentage of each unit.

There’s also a wide range of utilities included, or not, in a condo fee. Some fees include all utilities (water, sewer, trash, gas, and electricity) while others may only include trash with the rest paid directly by each owner. Some fees even include internet and cable! These differences can change your monthly bottom-line between two condos by hundreds of dollars.

Another important consideration when analyzing condo fees is how well they’re being used to fund the reserves (the Association’s savings account for major repair or replacement work) and whether future planned/unplanned building expenses will require a fee increase or special assessment. A well-funded reserve account usually means long-term fee stability and decreased chances of a special assessment. Associations should complete a new Reserve Study every five years to maintain a sufficient reserve balance and healthy building maintenance.

Other Thoughts On Condo Fees

Over the past couple of years I’ve written other condo fee related columns you might find helpful including A Case For Condo Fees, How Fees Impact Resale Value, and Finding Savings In Your Condo Budget.

While I have the attention of condo owners/Boards, I’ll also remind everybody that I’m organizing an info session on smoking bans in condos and to email me at Eli@EliResidential.com if you’re interested in joining.