hoa-maintenance-checklist.jpgWhat should be included in our HOA maintenance checklist?
What IS a maintenance checklist?
What is the difference between maintenance and capital improvements?
How do we budget for our building’s HVAC replacements?

How should we pay for the new roofing on our clubhouse?

Why are we always making last-minute repairs?
Any of these questions sound familiar? Whether you're a new association board member or been an involved volunteer for a while, community maintenance and capital improvements can feel overwhelming at times. Ultimately, you want to know what repairs or improvements you should make, when you should make them, and how you'll pay for them.

Consistent maintenance and capital improvements supported by sufficient reserves can lead to an increase in property values. In a study conducted in 2017 by Robert Nordlund, CEO of Association Reserves, experts at FirstService Residential found that associations with well-funded reserves above 70% averaged 12.6% higher property values than similar homes in associations with poorly funded reserves 30% or lower.1

For a deeper dive into reserves and how to maximize your funds, read our article, Association Reserves: Beyond the Basics and Maximizing Funds.
So, what are the most important aspects of maintenance and capital improvements that your board should know? Start with these four questions:

HOA and High-Rise Maintenance vs. Capital Improvements: What's the Difference?

Knowing and understanding the difference between routine maintenance and capital improvements is the key to staying on budget and maximizing expenses. First, let's define the two categories:

Routine maintenance includes wear and tear projects or repairs that ensure your community and building’s assets are fully functional, correctly functioning, and maxing out their “useful life”. Many of these maintenance projects are frequently revisited, and the budget for these projects is accounted for during your annual budget planning. Some examples of routine maintenance include landscaping, paint touch-ups, water, electric maintenance, heating issues, and more.
Capital improvements include large-scale maintenance projects that add to your resident experience, property values, and aesthetic appeal. These projects include adding or restoring a community playground, replacing a swimming pool filtration system, or resurfacing roads and pavements.

Connect with your management company and engineering team for guidance on how to properly determine which projects qualify as capital improvements and which projects qualify as routine maintenance. Because capital improvements are funded separately from your annual meeting budget, a special assessment might be necessary; however, this depends on the project’s scope. Continue reading for a deeper dive into funding options for your projects.

Want to know how you can plan for maintenance and capital improvements with minimal chances of requiring a special assessment? Read our article, HOA Capital Improvement, Maintenance and Useful Life: Are You Prepared?  for an in-depth explanation of the relationship between these types of projects and their useful life.

HOA Maintenance Checklist: How Detailed is Yours?

Maintaining your community's shared spaces and amenities or your high-rise building's complex systems is no simple task! How your association handles maintenance directly impacts your community's reputation, resident experience and property values. The key to staying on top of your maintenance and budget is having a robust maintenance plan that covers preventive maintenance, repairs and replacements. 

Without a concrete plan or checklist, your association may face higher living costs due to the shorter shelf life of valuable assets, a greater frequency of emergencies and a diminished reputation with residents. So, what does a great maintenance plan look like? It should consider your community's specific needs and focus on the three primary maintenance categories: preventive, repairs and replacements.

Funding Your Capital Improvements: What Are Your Options?

Renovating and clubhouse, installing a new playground, or upgrading the rooftop pool isn’t part of everyday maintenance. Large-scale projects like these require more planning and extra funding that is separate from your operating funds. To fund capital improvements like these, you can use three options: reserve funds, a special assessment, or a business loan. Because each association has their own unique needs, it is best to work closely with your management partner to assess the pros and cons of each option before coming up with your HOA maintenance checklist.
Use your reserve funds: Although your reserve fund is the ideal way to pay for capital improvement projects, remember to be aware of the restrictions on what you can use it for. It is important to work closely with your association’s management company and attorneys to ensure you’re using it for the right projects and to avoid heft tax bills. No matter how prepared you are (or think you are), life happens. Accidents and natural disasters are impossible to avoid, and you could face a long list of projects to fund. Therefore, it's best to keep your reserves fully funded and have alternative options for emergency funds.
What is the best way to maximize your reserves and how do you avoid common blunders? Find out in our article, Association Reserves: Beyond the Basics and Maximizing Funds, and download the free guide for more information. 

What is the biggest (and common) blunder when it comes to your reserve funds? Watch a quick video clip below to hear from Kirk Kowieski, vice president at FirstService Residential.

Take a special assessment: Special assessments aren’t too popular among many boards; however, if done correctly, they can be a viable option to fund your capital improvement projects. If your board decides to take a special assessment, it is important to create a strategic communication plan that you can present to your residents. The key is to communicate with all your residents and make sure all their opinions are heard and valued before executing any projects.

"People are often looking for quality of life and consistency offered by an HOA. When your board communicates with residents and helps them understand the why behind capital improvements and special assessments, that level of understanding leads to greater alignment and agreement."

- Robbin Brown, Executive Vice President, FirstService Residential

Obtain a loan: If you don't want to use your reserves or take a special assessment, a business loan might be your best bet for funding your capital improvements. Most banks will grant association loans up to 10 years with little or no prepayment fees. They may also extend amortization to 15 to 20 years and offer lower closing costs. As always, consult with your management company, attorney, and governing documents before taking out any significant loans.

FirstService Financial retains excellent relationships with regional and national lending partners, allowing them to negotiate the best pricing and terms available for FirstService Residential clients. They can provide unique expertise in underwriting common interest community loans, flexible financing requirement solutions and a streamlined underwriting process that results in expedited funding for associations.
Recently, FirstService Financial provided funding for an aging condominium community in San Diego that required significant maintenance projects such as roof replacements, exterior building paintings, street repairs, and cement work. The board of directors worked closely with Karla Chung, vice president of FirstService Financial, to simplify the process and obtain a $1 million business loan.

So, what is the best funding option for your association? The answer will depend on your association's particular needs and budget; therefore, you should your HOA financial services provider, attorney, and management company before making any decisions.

Maintenance Mentality: What's Your Association's Style? 

Now that you understand the difference between routine maintenance and capital improvements, the importance of a well-documented HOA maintenance checklist, and various funding options, it's time to assess if your association has the right maintenance mentality. What does this mean, and why is it important?

Having a preventative maintenance plan in place is essential to maintaining your community’s reputation, keeping property values up, and creating positive resident experiences. Often times, associations tackle maintenance issues with a reactive or a deflective style because they lack the expertise, bandwidth, and resources to be proactive. Learn more about these styles below and what you can do to be more proactive.

So, what is reactive maintenance? Reactive maintenance is the most common way HOA and high-rise boards take when fixing or replacing assets. The notion of “if it’s not broken, don’t fix it” is a common mindset for many associations who don’t have the necessary resources and want to keep costs down. This approach may work for a few small repairs; however, it is not a sustainable solution because the cost of immediate repairs will be more expensive in the long run. It is important to remember that maintenance projects and repairs and predictable and can be planned for in your annual budget. Consult with your management company or maintenance specialists to learn how to stay ahead. 

Deflective or "third-party managed" maintenance is another common style where your association relies on vendors or third-party companies to manage maintenance projects. Vendors may not have the capacity to invest much time and effort into your community’s needs depending on the client list. Additionally, you may have multiple vendors taking care of different types of equipment. In this case, it will not be easy to ensure all projects are completed correctly and comprehensively. Consider having an in-house engineering team or a point-of-contact person who can prioritize and care for all your association’s needs rather than outsourcing your maintenance responsibilities.

Preventive maintenance is the recommended approach to protecting your assets and preventing surprise expenses. Take care of all the “what-ifs” for regular maintenance in advance. If you do this, there will be more opportunities to invest in capital improvements, such as green building initiatives and energy-efficient equipment. An HOA maintenance checklist requires regular inspections and ongoing monitoring of your buildings, amenities, and equipment by trained professionals who can also educate the board on how to plan and what to prepare for. This is why it is important to work with an experienced property management company with in-house experts, a network of valuable resources, and partnerships with engineers and experts.

Discover which maintenance style will work best for you. Read our article React, Outsource, or Prevent? Find Your Association's Maintenance Style for an in-depth explanation of the three styles and determine which matches your association.

Final Takeaways

One of the primary responsibilities of an HOA board is to protect and enhance the assets of the community while providing residents with excellent quality of life. Understanding the difference between routine and capital improvements, recognizing the importance of having a detailed HOA maintenance checklist, and being aware of potential funding opportunities is the key to a thriving community. 

1. Nordlund, Robert. 2017. " 10 Ways to Improve Property Values." Reservestudy.Com. https://www.reservestudy.com/resource/article/10-ways-to-improve-property-values/

Disclaimer: This article is provided for information purposes only and does not constitute legal advice.
Monday March 13, 2023