A Board Left in the Dark
In 2022, a prominent 36-story high-rise condominium association and its adjoining garage association in downtown Chicago completed their first reserve study. Unfortunately, the firm they chose to complete this study left the board questioning the quality and usability of the report, leading the association to doubt the value of reserve studies altogether.
While it’s common for boards to find reserve studies initially complex, this firm failed to provide the post-study support that communities often need to clarify the reserve study report and understand how to use it. As a result, the board struggled to understand the findings and funding recommendations, leading to tangible consequences.
In their initial study, asset ownership between the condo association and the garage association was misclassified, and a major roofing project that was estimated to cost around $40K ultimately cost $400K – an oversight that eroded the board’s confidence in reserve studies and had significant financial ramifications. Additionally, the firm provided limited support after report delivery, and the absence of a meaningful post-study consultation left the board confused, skeptical, and unable to effectively use their reserve study for future budgeting.
A Critical Crossroads
By 2025, the association, now over 20 years old, was approaching a critical juncture. With several large-scale capital projects on the horizon in the next ten years, management recognized the need for an updated reserve study to guide upcoming budget cycles. However, the missed costs from the 2022 study and inadequate support left the board with lingering concerns surrounding reserve studies and drove them to consider alternative options.
The Switch: Tailored Support
Because the board needed to rebuild trust in the reserve study process, they focused on finding a new firm that would not only avoid the shortcomings of the previous study but also show a willingness to give them the level of support they needed to both understand and use the report. Enter: Reserve Advisors!
Upon beginning our work with the condo, we worked to allocate the assets between the garage and condo associations properly. Shared assets such as fire suppression pumps, life safety sprinklers, and security systems had been improperly classified in the previous report, bringing confusion to both the allocation of and funding for these components. Working alongside the board and management, we ensured accurate ownership, ultimately assigning 50% to each association. Because of the discrepancies in the previous report, it was crucial that these assets were funded correctly moving forward.
Because the condo’s roofing project was significantly undervalued at $40,000 but ended up costing the association ten times that amount, we worked with the board to create a funding plan without distortions, while also educating them on how we estimate accurate project pricing. By providing education surrounding the numbers presented in our report, we were able to help the board regain trust in the reserve study process. At the same time, they became assured that they had a quality report on which to base budgets and project timing.
Education, Clarity, and Collaboration
Given the failure of the association’s prior provider to engage in educational discussions or collaboration after report delivery, we knew that the board needed post-study support tailored to their needs to utilize the reserve study effectively. Instead of expecting the board to navigate the complexities of their report independently, we worked with management to develop a personalized presentation of the report’s findings and recommendations. In addition to answering specific questions outlined by management and the board president, this presentation:
- Detailed near-term capital-intensive projects
- Educated the board on how we gather project timelines and cost estimates
- Explained how the recommended funding plan was created to support near and long-term needs
- Provided a framework for how to utilize the report in annual budgeting decisions
By educating and collaborating with management and the board, we were able to provide clarity on the true cost of ownership of both the condo and the garage association’s common assets, leaving the board feeling comfortable with their funding plan and confident in their ability to utilize the study.
The Result
Through continuing engagement, education, and tailored support, the association entered the next budgeting cycle with a clear understanding of its capital planning needs. During this process, the board gained a renewed confidence not just in reserve studies, but in their ability to use the study as a strategic capital planning tool.