avoid falling behind…look ahead with proper planning

Proper planning is one of the most efficient methods of increasing the possibility of achieving our goals. So, how does an association board engage in proper planning? One of the more useful tools is a reserve study. At the high end, such studies are accomplished utilizing engineering as well as accounting services so that an association’s facilities may be accurately analyzed and future financial needs can be most accurately predicted. Such studies tend to be well worth the cost because they allow proper financial planning over the time span afforded by the life cycle of the association’s facilities. This allows an association to build financial resources steadily and to avoid sudden, large increases in condo fees and, worse yet, special assessments.

Another element of proper association planning is budgeting. The association’s budget leads to the unit owners’ financial obligations for the year which, in turn, leads to the association’s ability to conduct operations in a fiscally-responsible manner. Boards should be reasonable and realistic in creating the annual budget. Utilities tend to be on the rise. Similarly, vendors seem to charge more, not less, for their services as time marches on. In short, just as we experience on a personal level with our household budgets, association operations suffer an increasing “cost of living” pattern over time. Associations need to plan for this and make minor year-to-year adjustments in condo fees accordingly. The failure to do so typically results in an inability to meet financial demands. This manifests itself in underfunded reserves, special assessments and delayed maintenance projects. Smaller, consistent increases in the budget are more easily accepted by the unit owners association.

On the issue of maintenance projects, this is another area ripe for proper planning. Boards should avoid underestimating the time involved in setting specifications, collecting bids, selecting a vendor and negotiating a contract. This is especially true for projects requiring a particular season in order for vendor services to be performed. Beginning the process well in advance of the time for performance of services is the best way to ensure the project will begin and end on schedule.

Finally, a subject near and dear to me, legal matters. Although commonly misconceived as “crises” to be dealt with when an association’s hand is forced, it is possible to lessen the blow of legal matters with proper planning. This can be achieved by creating and maintaining proper records with respect to troublesome events. Evidence (e.g. documents, communications, photographs, etc.) should be preserved before it is lost. Witnesses should be secured in a timely fashion and prior to the fading of memories. Sometimes, early consultation with legal counsel may allow an association to sidestep a legal dispute through strategic action and not merely “deal with” the problem when it “blows up”. In such cases, the expense of strategic advice may be far less than the expense associated with even successful prosecution or defense of a lawsuit.

Here’s to successful operations through proper planning!

By: Gary Daddario


Posted in: Insurance


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