I am sure everyone remembers the tragic events of last June in Surfside Florida, when a partial collapse killed 98 people at The Champlain Towers Condominiums.
The cause of the collapse appears to be a combination of poor design, poor construction, and poor maintenance. More specifically, it appears a structural column or concrete slab beneath the pool deck likely gave way, causing the deck to collapse into the garage below.
The insurance companies settled with the plaintiffs of The Champlain Towers tragedy for $1,004,600,000.00. That is over one billion dollars!
The Wall Street Journal reported that the condo board association president wrote a letter in April 2021 imploring residents to pay an assessment to address serious structural problems in the building. “The important lesson to take from this tragedy is that when structural red flags are raised, immediate action is prudent to save lives and avoid catastrophic outcomes,”
It is Del Val’s position and recommendation that every homeowner association and condominium association have a Capital Reserve Study done and as well as periodic updates to the study. Once a Reserve Study is done, it should be updated every 3 – 5 years.
A capital reserve study is performed by an engineering company. It is a comprehensive analysis of the financial health of an association and the common areas HOA members share. Common areas are those parts of a community for which the association has responsibility and could include a neighborhood swimming pool, roofing on community buildings, landscaping through the community, building exteriors, parking areas, and more.
The study focuses its inspection on two main areas: the physical state of the common areas and the financial state of the association’s reserve funds. The primary purpose of a Reserve Study is to offer recommendations as to the amount of money a community, building or other organization should set aside on a yearly basis for the future replacement or major refurbishment of their commonly owned elements. The study will identify the common and limited common elements, assess the condition, and estimate their remaining lifespan and replacement cost. The cost of a reserve study will vary by association depending on its size, amenities, the complexity of its structures, etc. Usually, these studies will range from around $2,000.00 to $10,000.00 and will project capital replacements and their cost over 20 – 30 years.
This is an especially valuable tool so Boards can properly budget for capital improvements before a common element or structural component deteriorates to the point of no return.
The Champlain Towers tragedy is an extreme case and will hopefully never happen again. However, that does not diminish the importance of taking proper care of the asset. It can not only save money but also property and life.
Mr. Alan Silverman, Director of HOA Services at Del Val Realty & Property Management has over 25 years of experience in real estate management, including managing large apartment communities as well as numerous condominium associations.