I have been treasurer of The Alfred condominium for the past 19 years. This was a pied-à-terre that I purchased in 1987 and moved into early in 1988. Three years later, with the intent of “getting involved,” I volunteered for the board of directors. The current treasurer was moving up to the president’s job, and there I was. With a solid, although not professional, background in accounting and being a “numbers person,” how difficult could it be?
By the end of the second year, I had it down to a science. Each month, I would receive a financial report from the managing agent, including copies of all bills paid and the checks, and actual expenses versus budget. After reviewing the transactions and the budget versus the actual numbers, I would send a written note to the managing agent with any questions (which we review prior to each board meeting).
In addition, the arrears, charge-back report, and reserve fund reports, including current positions (T-bills and CDs), are provided for my review. In preparing my first budget, it occurred to me that a building this size, a 37-floor high-rise, should have reserves in the event of a major capital project or repair. So, we started the accumulation of our reserve funds.
As in all situations there are at least two sides to the decision “to reserve or assess.” On the one side those in favor of assessing feel that current residents should not have to pay for possible capital projects that they may or may not be there to enjoy. On the other side, those in favor of reserves feel it is less of a burden to increase common charges a small amount and accumulate a comfortable reserve over time.
I take the latter position. Since that decision was made we have established a seven-figure reserve that we add to annually. The test of that decision came in early 2004.
The building was now over 15 years old and was showing its age. A decision was made in early 2004 to renovate all of the hallways including new carpeting, wallpaper, and painting. After the project was put out for bid, we found that the cost would be in the mid-six-figure range. The entire project was paid for with our reserves, no assessment.
A few years later, the board decided to renovate the lobby. Although not as big a project as the hallways it was in the low six-figure range, again paid for without the need for an assessment. We recently renovated the reception area in our health club with new furniture, carpeting, and wall treatments. Guess what? No assessment. We are now in the process of replacing our main water supply riser and as part of that project replacing our H-watt hot water system that has plagued us for some time. It was funded thorough our capital reserves.
Since we add to our reserves regularly, the account is still in the seven figures. I have no doubt that if we had to assess our residents for any one of these projects there would have been an uproar. The experience at The Alfred has served me well. In 1998, I sold my primary residence on Long Island and moved to a gated community, also on Long Island. Since it was a new community established as a homeowners association (HOA), the developer controlled the board until a stipulated percentage of the homes and villas were sold.
Since I was the type to always be involved, I became one of two residents that served on the first board with the developer and when the HOA took over the board I became its first treasurer. I applied what I learned at The Alfred and immediately included a deposit to a newly established reserve account as part of the common charges. I’m sure this will prove to be a sound decision in the future. After a break from the HOA board I came back as its treasurer in 2008, and I’m happy to see that the small reserve I started in 1998 has grown to a comfortable cushion.
I’m sure there are still those who feel strongly that the assessment approach is the way to go but, as you can see, I’m not one of them. Perhaps if my past experiences were different, my point of view would also be different but as the saying goes, “the proof of the pudding is in the eating.”