A Reserve Plan (also called Reserve Study) is an essential part of running a Condominium Association. It provides the Board with a systematic way to track the repair and replacement schedules of the condo assets over a 20 to 30year period and a fair way to distribute the costs to all the members who benefit from them over the timeline. A properly funded Reserve Plan eliminates the need of special assessments which are unfair to those that have to pay them. And with adequate

funding, maintenance gets done when it needs to be done instead of piecemeal or deferred.

There are just too many advantages to reserve planning to ignore. The Board that follows a reserve plan is succeeding in a fundamental charge: to protect and maintain the condo's assets which have a direct correlation to the members' home/unit values. Conversely, the Board that does not have or follow such a plan is guilty of negligence and failing in its fiduciary duty. The implications are clear and significant and the wise Board chooses the high road.

While 30-year plans are common, 30 years is a long time and things can happen that are impossible to predict. Inflation moves up and down as does return on invested reserves. Construction costs can be higher or lower and are based on competition, the state of the real estate market and the general economy.

One of the biggest wild cards in this 30-year projection is how well preventive maintenance is done. Preventive maintenance are those little things that, if left undone, have huge impact on a component's useful life. For example, if a roof is not kept clean of moss, or small seam separations repaired, the normal useful life could easily be cut in half. Siding that is not inspected, repaired and caulked on a regular basis can fail years sooner than it should. Failure to perform regular and adequate preventive maintenance can undermine the financial prognostications.

How well the Board invests reserve funds also has enormous impact on the funding model. Improving the rate of return an average of only 1 to 2 percent over the 30-year period can reduce owner contributions by thousands of dollars (in condos with extensive assets, hundreds of thousands of dollars).

The message is clear: A Reserve Plan is an essential planning tool for all condos but to be truly useful, it must be tweaked and refined over time. It's like tending a vineyard. Left untended, the fruit (value) will gradually disappear.