June 2023

“The general guidance for landscaping is that it is not a capital item...”

CAPITAL EXPENSE... from page 18.

section of the roof required new shingles and plywood, an argument could then be made that the repair has materially extended the useful life of that roof, and could be funded through the replacement fund. Question: I am replacing trees and landscaped areas through the community. Can I charge this to the replacement fund? Guidance: The general guidance for landscaping is that it is not a capital item, as it does not fall under the defini tion of a capital item as documented above. To help save for these projects, many sites will utilize a third “deferred mainte nance” fund. This fund is typically utilized for projects that do not meet the criteria to be considered capital, but also do not occur annually. As such, they do not appear in the annual operating budget. Utilizing a deferred maintenance fund can help boards budget and save funds for these projects that occur less frequently than annually.

One exception for landscaping expenses that I have seen in practice related to a sewer project. In order to access the sewer line, the contractor was required to remove a large landscaping bed. The bed was reinstalled after completion of the sewer project. In this scenario, it was determined that the landscaping expense was permitted to be funded through the replacement fund as it was a required step of the larger capital sewer project. Another exception to this guidance relates to hardscap ing projects. Retaining walls, hardscaped patios, and walk ways, and even irrigation systems are commonly included as capital components within an engineering study. Question: Can I expense engineering fees to the replacement fund? Guidance: It is not uncommon for a large capital proj ect, such as roofing or siding, to require an onsite engineer

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JUNE 2023