By Peter B. Miller, RS, and Rick McKittrick, MillerDodson Associates, Inc.
Now that we have marked the second anniversary of the Champlain Towers South partial collapse, it is time to examine where we have come regarding the Reserve Study field. This tragedy opened our eyes and made clear several issues, not the least of which was a reform of the way we do Reserve Studies. As we all know, the Community Associations Institute (CAI), was very active in its response to this disaster, starting with a physical presence on the ground in the days immediately following the collapse, followed by its Condominium Safety Public Policy Report within months of the event. CAI also appointed several task forces to study specific topics such as Reserves and Reserve Funding, Building Maintenance and Structural Integrity, and Insurance. The input from these task forces culminated with extensive changes to CAI’s Reserve Study Standards. These changes to the Reserve Study Standards are important to understand, not just for Reserve Specialists, but for Community Managers and Community Association Volunteer Leaders as well.
Input from the hundreds of CAI task force participants showed that the Reserve Study Standards of the late-1990’s needed to be updated to reflect the current practices and the rapidly changing technologies in the 21st Century. The updated Standards challenge the older practices such as requiring only a 20-year minimum period for the Reserve Study. This has now been updated to require the Reserve Study to cover a 30-year minimum. Previous Reserve Study practices excluded many components that had a Normal Useful Life (RUL) greater than 30 years. The new Standards require that proportional funding be provided so that a component with a 40-year Normal Useful Life would have 75% funding at the end of 30 years, for example. Previously ignored or overlooked “in the wall” common elements such as plumbing pipes, and electrical and mechanical equipment must now be included as Reserve inventory items. Additionally, Reserve Studies previously required that replacement be “in-like-kind”, meaning that you replaced each component with an identical component. The updated Standards recognize that components can be replaced with newer, more energy-efficient technology, or with components that have a lower life-cycle cost.
The updated Reserve Study Standards also acknowledge that maintenance practices are integral in planning for the future physical and financial needs of a building, and therefore need to be considered in preparing the Reserve Study. The new practices recognize that a good maintenance plan can extend the Useful Life of components. Conversely, the lack of a maintenance plan can and should result in a reduction in the Normal Useful Life of the various components. Such a reduction in Remaining Useful Life, of course, increases the amount of Reserve Funding necessary for these components.
Most importantly, the new Standards recognize that the structural integrity of buildings can no longer be ignored. While the actual structural components of a building are still not included in the Reserve Study inventory, funding for periodic professional structural evaluations of certain building types should be provided in the Reserve Study. The Taskforce on Reserves and Building Safety recommends that buildings be evaluated structurally every 10 years up to year 20. Buildings older than 20 years should be evaluated every 5 years. The exact “scope” of these evaluations is not defined within the new Standards. However, it has been suggested that the scope of these evaluations be defined by the appropriate ASTM Standard.
It is hoped that the Reserve Study Standards will continue to be a model for State and local governments that are considering legislating Reserve Studies. And it is not just State and local jurisdictions that are tightening these requirements. CAI has seen outside forces such as Fannie and Freddie, other lending institutions, as well as the Insurance industry pushing for tighter Standards.
The new Reserve Study Standards can be found on the CAI website at www.caionline.org under Reserve Study Standards. It should be noted that the updated Reserve Study Standards do not change the requirements and qualifications for applying for the Reserve Specialist Designation.
Peter B. Miller, RS, is the President of MillerDodson Associates, Inc. He is a past member of CAI’s Board of Trustees and served as a Co-Chair of the Taskforce on Reserve and Building Safety.
Rick McKittrick has worked as an Analyst with MillerDodson for more than 15 years.
