The Tale of Two Associations: A Case Study

August 12, 2013    Traci Ross   

Homeowner’s Associations have a hefty responsibility to manage and protect common area assets. When a community manager leads the Directorship to interpret and implement Reserve Study based planning, the result is a specific, systematic, timely, and sound fiscal policy. Taking a long-term, pro-active approach to asset management WORKS, and will keep you within the budget. Here are two real-life examples.

Royal Woodlands

Royal Woodlands is a lovely community nestled deeply in the heart of high-ticket Orange County, California. Local realtors use descriptions such as “beautifully manicured,” and “a year-round resort” to describe the million dollar listings in this fast-growing zip code. Marcus, the President of the Board, gives the credit to the amazing leadership of the management firm. The community manager has helped guide vendor selection to firms that share the community goals of being PRO-ACTIVE and PRACTICAL. She brings vendors to the table to educate and lead the Board in relevant decisions. XYZ Pool Service, a trusted vendor, alerted the Directorship in 2011 to four high-ticket components nearing the end of life. Two very large and hard to source pool pumps, and two million-plus BTU pool heaters could feasibly cause as many as four of the five community pools to experience serious service interruptions. All of the components have manufacturing lead times of four to six weeks.

XYZ recommended a multi-year replacement schedule that includes PROCURING one pump and one heater for storage until needed. The directorship understands the need to keep the pools operational with minimal closures, and greatly appreciates learning about the newest generation of pool pumps that can reduce energy costs and as well as the overall cost of ownership because of a new “plug and play” standard. Using the Reserve Study as a basis, the team was able to assess the equipment on condition, not just age alone. Very often equipment life can be years beyond the forecast life. Preventative, pro-active asset management prolongs the life off all pool related assets. The Royal Woodlands Directors depend on the vendor team to evaluate ALL common equipment regularly to determine when the costs of operation and maintenance outweigh the cost of replacement.

At a recent meeting, a resident questioned Macus about the Board’s decision to replace a working pump. The installation interrupted his swim regimen. Marcus explained to the resident about the long-term reduced cost of ownership, but the resident was unimpressed. He was, however, impressed when Marcus proudly explained that the ability to keep the pool open 364 of 365 days a year is largely due to the pro-active replacement schedule. The homeowner was shocked to learn that a large, specialty pool pump can take up to six weeks to procure and repair!

Faded Rose

Faded Rose is a big community. On the eve of a Memorial Day weekend a community pool disaster ocurred. The pool had apparently lost electricity, and when the power was restored, a dangerous surge of electricity welded the components of the motor to a screeching halt. The pool is a green swamp, while Randy, the Board President, turns a deep shade of red. Faded Rose contracted their pool services with a company called The King of Pools -- aka -- Tom. When he called Tom’s cell, he got this recording, “I’m in Vegas for the weekend and can’t call you back until Tuesday. Leave a message.”

Randy called the community manager, Mike, and heard what he already knew. Mike had recommended the Board consider pro-active contractors at his first meeting serving as the community manager. Though Mike made a good case, Randy would not be convinced. He had lobbied the other Directors to follow his campaign – with slogans like “the only good vendor is a cheap vendor” and “low bid always wins.” Randy gave Mike the “I told you so” moment, and then followed with “Get this mess cleaned up!”

Thankfully, the community management company had been droing been doing research for a more reliable service and had done their homework. The company they had waiting in the wings to solve this issue was available and got the job done. But in the end, this community got what they paid for, and it was not cheap because suddenly it was an emergency call. The pool reopened within 24 hours, but from that day forward, a new “pro-active” policy was victorious.As you can see by these examples, implementing Reserve Study based planning and taking a long-term, pro-active approach to asset management as well as engaging vendors who proactively asses the remaining life of community assets is sound fiscal policy for the continued success of every association.

The Take Away by Crummack Huseby

As you decide on suppliers and vendors to use, due dilligence always pays off. It takes extra time to research companies, read reviews from multiple resources, walking properties they have serviced, but that's what we are here for. Open communication without egos and the common goal of "for the good of the community as a whole for long-term success" will help ensure you will avoid a Faded Rose.

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