CAI-NJ Nov. 2021(w)

FINANCIAL HEALTH... from page 20.

Legislative Update... from page 8.

11-99 (latest edition) Guideline for Structural Condition Assessment of Existing Buildings or other industry standards. George: You mentioned earlier that there may be structural documentation for newly constructed buildings…what are they? Ed: Final architectural and engineering design drawings used for construction shall be issued. If there are any chang- es to the structural components of the building, the developer shall provide the as-built drawings. The developer shall perform ongoing inspections during construction to confirm conformance to the plans and specifications. Lastly, the developer shall provide maintenance manuals and guidance for maintaining structural and operational systems and budget disclosures for them and cost for future inspections. George: Where do we stand with our state legislators in regard to this potential legislation? Ed: We have lined up a Senate sponsor for the legislation and are discussing options for sponsors in the Assembly. We do not believe that any legislation will be offered during the lame duck session but expect an introduction when the new legislative bodies are seated in January 2022. Many thanks to Ed and the mem- bers of our NJ Task Force for the work they are doing on this important topic. Stay tuned… we’ll keep you updated on their progress. Until then… stay safe. See you here next month. n

lumber and other construction materials has significantly increased, leading to higher than anticipated project costs. b. Timing Differences – As noted above, the cash flow schedules included in the engineering study following certain estimates. One of these estimates is the timing of capital projects. For example, if a roof was originally expected to have a remaining useful life of 15 years within the study, but began dete- riorating after only 5 years, it will have a significant impact on the cash flow schedule. Funds that were previously set aside for other components will now need to be spent on the roof, causing a shortage of funds. It is important for Boards to recognize these deviations from the study’s projections and adjust the replacement fund contributions accordingly. This is also why it is important to regularly update your study. Engineering professionals typically recommend that you update your engineering reserve study every 3 to 5 years. Once the Board has obtained all of this information, they will then face the decision of how to fund the project. These funding options usually include: 1. Organic Funding – Funding the project solely through amounts previously accumulated in the replacement fund (as well as future unit owner contribu- tions to the fund) 2. Special Assessment – Approving an assessment to collect sufficient funds to cover the cost of the project 3. Third Party Financing – Working with a third-party lender to borrow the funds necessary to complete the project. While there are pros and cons to each of these options, the board must determine which option best fits the specific needs and situation of their commu- nity. Checking the association’s governing documents and consulting with your accountant and legal counsel for any restrictions related to the passing of special assessments and obtaining loans are also very important steps in the process. This will help to ensure that the Board is not violating any restrictions. Although this article focused mainly on the financial aspect of capital projects, it is

important to remember the key underlying priority: maintaining the common elements. When the need for capital projects arise, the board will most likely perform an assessment of their financial health. The key is not to harp on the past. Whether the association is underfunded, overfunded, or right where they should be, questioning “how we got here” will not

provide an answer on how to address the funding needs at hand. The priority is to preserve the integrity of the common elements. This will help to provide a safe living space for the residents and guests of the association, as well as to maintain home values within the community. Following the questions and fact patterns laid out in this article will help to ensure that boards are starting off their projects on the right foot! n

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