We’re smack-dab in the middle of winter, but the season is right for community associations to gear up for upcoming capital improvements. Whether you are replacing roofs, installing new windows or resurfacing a parking lot, the groundwork can take months to lay.
Here’s what you need to do to be ready to go when the weather breaks:
1. Form your professional team. Have an architect or engineer define the scope of work and write the specifications. Use your attorney to deal with contracts and legal hurdles. Hire someone to oversee the project.
“When you are spending major dollars, you need to rely on experts to guide you correctly,” said Marcia Caruso, president at Caruso Management Group in Naperville. “The reason for it is layering your liability. When any issues come out, and you have relied on the advice of experts, you have legal protection.”
2. Choose a project manager. Your management company might do it for an additional fee, but should you hire them or someone else?
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It depends, said Brook Silvestri, senior vice president at Association Capital Bank in St. Charles.
“I’d prefer to see a professional construction manager when it’s a large, complicated project, say, north of a million dollars and multiple common elements and an extended schedule of a year or 18 months,” he said. “If it’s a $250,000 roof job, the property management firm is probably just fine.”
“I tend to let the architects and engineers do what they are trained to do, which is manage the work,” Caruso said. “If associations want management to monitor it, make sure it is clearly defined in the management contract and the board knows what the additional expense is going to be.”
4. Consult your governing documents. Make sure you have the authority to do what you want to do.
“Some declarations say how much money the board can spend before they have to get homeowner approval,” Caruso said.
“Getting a simple majority vote, especially for large associations, can hang up a project for a very long time,” Silvestri said. “It’s hard to get people to agree the tires on your car are black.”
5. Clean up your delinquencies. Lenders typically require delinquencies of no more than 10 percent of total assessment dollars or 10 percent of unit owners past due over 60 days, Silvestri said.
6. Line up your financing. It’s fantastic if you’ve got the money sitting in a reserve account and can write a check. Most associations don’t have that luxury.
If you plan to borrow money, go to prospective lenders with at least a rough estimate of the project cost, Silvestri said.
“A lot of clients contact us and ask, ‘How much can we borrow?'” he said. “But this type of financing is project-based. It’s not like residential mortgage financing, which is based on your credit score and value of your home.”
7. Keep owners informed. Let them know what you’re thinking about doing, what you are doing and what you have done, Caruso said.
“Communication and transparency are critical to your success,” she said. “Tell them everything every step along the way. Otherwise, they hear one piece of what they think you said, and you’ll have trouble. We are living in a very litigious society. You cannot overcommunicate.”
8. Pull together financial documentation. Lenders require reams of documentation to demonstrate the financial health of your association.
Here is some of what you’ll need: current budget with year-to-date comparison, three years of year-end financial statement prepared by a certified public accountant, reserve study, meeting minutes evidencing approval of the project and corresponding financing, collection policy and certificates of insurance.
“If associations get on the ball, they still have time to get everything organized before the weather breaks,” Silvestri said. “But they can’t lollygag.”
Pamela Dittmer McKuen is a freelance writer.