So this week, my mom asks me to attend her Board meeting because the agenda says they will speak about the budget for 2023. She knows I have been babbling a lot lately about how assessments are going to soar and she wants to know if her community is set for the troubles I’m predicting. So I went.
I won’t name the community and I won’t name the management company. The point here is not to embarrass anyone. The point has always been that we all learn something each week.
So the association has six buildings, each with about 40 units. Do the math and that’s about 240 units in total. They have about $59.000 per building in reserves. They think they’re doing great. The meeting is breezing along and I’m thinking to myself that these poor senior citizens have no idea what’s coming. A lot of time was spent on towing cars and feeding the ducks and I couldn’t help but think that they better re-focus their priorities or the ducks will be living in their apartments while they are on the outside looking in.
I certainly did not want to be rude. Again, I wanted to politely educate. They truly had no idea what was going on in terms of the new laws. They heard some rumor that costs were going up in a year or two but that it would be totally manageable.
I waited for my turn to speak and then broke the bad news. I told them that in about two o three years they have to do a Phase One Study of each of their four story buildings by a licensed architect or engineer who will look for signs of deterioration and that this cost will knock their savings in about half. I then told them that they would have to do a Phase Two Study that allows the Phase Two Architect or Engineer to do destructive testing. That brings their savings down to zero. I then informed them that the Phase Two inspector will likely leave them with a laundry list of repairs to make that will then unfortunately result in a special assessment and/or the borrowing of money from a bank over a long period of time. Panic was setting in as none of this was included in the budget or reserves.
I then told them that it was going to get worse as in two years they had to have a structural integrity reserve study prepared by an architect or engineer that will no longer include reserving for 3 categories, but 10, and that the cost of this study will certainly be 5 figures per building! I finally concluded with informing them that the reserves could not be waived and that each of these categories will need to be completely funded going forward. Shock and awe. Again, the cost for this engineer was not being reserved for either.
Let’s just say this is one of the more well-known communities run by one of the more well-known management companies. My thought was………….if this community doesn’t know what’s going on and what’s about to happen, then who does?
I know management companies are prohibited from teaching the law as per an opinion of Florida’s Supreme Court. Since that’s the case, management companies have an obligation to ask the association’s attorney to come and teach the board the financial issues that are coming quickly. Rest assured that when the annual budget spikes dramatically in one year, without proper advanced notice from the management company, that Management Company will be gone. In addition, management companies should not disgrace themselves by telling their board members to get certified by signing that stupid form that says I read my governing documents. Reading the governing documents will not educate anyone on the new laws that are coming and the preparation that is required. Tell them they should get certified by taking an educational course and that if there was ever an important time to take the course – now is that time.
I certainly hated ruining the morning of those wonderful women who serve on my mom’s board of directors. But someone had to do it. And management companies and association counsel better start ruining some mornings as well instead of answering questions two years from now about why our budget has suddenly tripled and we no longer have a reserve account.