Reserve Fund Studies
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An interview with Sharon Bigelow where we discuss Condominium Reserve Fund Studies. What a reserve fund study is, what needs to be included in a study, the differences between studies, what to look for when hiring a reserve fund study specialist, and what you should do once you receive your study.
So stay tuned!
Rafal Dyrda: Welcome to the Condo Web Show. The place where industry experts share their tips, advice and help answer your questions so you can run a more efficient condo and spend less time in those pesky board meetings. On today's episode I'll be interviewing Sharon Bigelow where we will be talking about reserve fund studies, what a reserve fund study is, what needs to be included in a study, the difference between studies, what to look for in hiring a reserve fund studies specialist, and what you should do once you receive your study. So stay tuned.
Sharon thank you so much for joining me on today's interview. I'm super excited that you're here today. We're going to be talking about reserve fund studies. But before we get onto that topic why don't you introduce yourself to our audience please.
Sharon Bigelow: Well thank you Rafal for having me. My name is Sharon Bigelow. I am a reserve fund studies specialist. I have been doing reserve fund studies on my own for almost 10 years now, but have been doing them in total for over 12. That means including probably about 600 studies to date, which is a lot. That's about it about me.
RD: And you've educated people on the topic as well.
SB: Yes of course. I always forget about that. For the past 10 years I have been a member of CCI and a board member, as well as the education chair at certain times of my career there. And I have taught several CCI courses including most of the CM courses and all of the reserve fund study courses, and other courses that they have, pretty much anytime somebody didn't show up.
RD: For those that don't know, CCI is the Canadian Condominium Institute, which is a national organization that educates boards and owners, pretty much anybody in a condominium, so when they ask somebody to present on a specific topic you have to know your stuff. You have to be an expert in the industry. They don't just ask somebody off the street to come and speak about a topic right?
SB: No I'm glad they don't. I was very fortunate. I had quite a few role models and people to help me get into the industry, and I learnt a lot from those people.
RD: It's always good to have good mentors and a good network of people that can guide you in the right direction. So reserve funds, what are they? What is a reserve fund study?
What is a Condominium Reserve Fund Study
SB: Reserve fund study is basically a document that gives you an inventory of your common property, as well as how much it will cost to replace it, and when it needs to be replaced. You're getting a document that has a list of, for example, your shingles and when they're going to need to be replaced and how much you should be putting away now to replace them.
Why do Condominiums need Reserve Fund Studies?
RD: Okay. I guess you kind of tied into it. Why do we need a reserve fund study?
RD: Sorry, some people think it's like, oh it's just a document that's going to sit in a cupboard somewhere, you know, we're going to revisit it. What is it for? Why do we need it?
SB: You know what? That actually happened to me Rafal. One of the first board meeting I went to I sat there and argued across the table from an 80 year old man saying that asphalt would last for 50 years in Alberta.
RD: I wish our roads lasted 50 years.
SB: For two hours we sat there and argued about this. And then they looked at me at the end of this board meeting and said, "That's okay. We don't use this document anyway." And they shelved it. The reserve fund study is a really valuable tool for the board. It helps them to budget when they need to replace things, and most reserve fund studies will also have a minor maintenance insert as well in them, so that it tells you, you know, you have to paint the fence, or you need to calk the windows, or you need to clean the carpets, or things like that. So it's a great document for the boards to use on a planning basis.
What happened years and years ago before reserve fund studies were incorporated, was that people were losing their homes because of huge special assessments, because there was no money put away. Single moms or anybody was just, they were losing their homes because all of a sudden they had to do a building envelope retrofit and there was no money and they had huge special assessments. That's when the Canadian government incorporated this reserve fund study idea.
RD: And you know what? I've heard of people and I know of people that had to move because of special assessment.
SB: You know what? It still happens to this day.
What is a Reserve Fund Study Used For?
RD: Yeah it still happens and then the reserve fund study, like you mentioned, it's a tool to plan and focus for the future. So you know how much you need to save, you know if you need to increase your condo fees or not right? You need-
SB: Oh increase your condo fees.
RD: Right and that's-
SB: Nobody wants that to happen, but unfortunately a board has to do what's in the best interest of the building, not only what's in the best interest of the unit owners.
SB: And sometimes increasing your condo fees or doing a small special assessment, or sometimes even doing a large special assessment is in the best interest of the building.
What does a Condo Reserve Fund Study Consist Of?
RD: So what does a reserve fund study consist of? What does it include? What's inside of it?
SB: My reserve fund studies have a title page, obviously, table of contents, it has a list of the components, it has the financial information, what's going on right now with the condominium corporation. And then it has financial recommendations as well. I had one project that actually didn't want to give me their financial information, and I was very adamant that there was no way to do a reserve fund study without telling me what they were contributing and what was in the account at this time, so that was kind of interesting. As well, you know, some reserve fund studies don't have pictures in them and don't separate each component out separately. Mine do. Lots of pictures to show you what's going on with your building. And then a table, not a table of contents, a glossary of terms, I guess is the word for it.
RD: You know what? I do like the idea that you're including photos and pictures, because if somebody's not really knowledgeable about certain components inside of a building, now they actually get to see it right?
RD: So if you tell them, the sump pump need to be replaced, this is what it looks like. This is why it needs to be replaced. People are like, "Ah okay now I get it." Right?
SB: You know I've read a lot of reserve fund studies and a lot of the written in, and I'm going to call it, engineer language where the average person, even a doctor, can't understand them. Only engineers can understand them. My studies are all written in, not simple language, but in ordinary language we'll call it, so that anybody can understand it, a house wife, a teacher, a doctor, a taxi cab driver.
RD: And you know what? It has to be written in that language because you never know who you're going to have on the board. It could be a student, it could be a lawyer, it could be a doctor, it could be a teacher, and like yes, these documents need to have all the information in them, however, they need to be legible. They need to have common language right?
SB: Common language that you can understand, that you can use. And so with the pictures it really helps that because each picture's got a title on it and you can understand what's in the picture. You know most of the pictures are just what the general condition is within a study. Sometimes there's pictures that says, oh my gosh this is falling apart.
RD: So you've been doing these for a long, long time.
SB: Not that long. You make it sound like I'm 70.
SB: For almost 12 years.
RD: That's a long time, 12 years. If you're doing it for 12 years, you know your stuff.
SB: Well I was very fortunate. I had a construction background before I started doing reserve fund studies and the opportunity was given to me, and I took it and I ran with it.
Why do you focus on Reserve Fund Studies?
RD: So tell me one thing. What drives you? You've been doing it for 12 years, you're still doing it. What drives you in this role? Why do you keep on doing it?
SB: You know the best thing about doing reserve fund studies is one, I get to work from home, which is great. I have no overhead so I work from home. Two, I learn a lot. I just actually recently, after 12 years, went on a roof and had never seen that type of roof before in my life. It was just a styrofoam roof with a water coating on top of it. But I'd never seen a flat roof like this before in 12 years, so I actually have some contacts in the roofing industry. Contacted a friend of mine and we sat down and he told me everything I possibly needed to know about this roof, so for me, that's one of the interesting things about my job is that I keep learning new things.
And I'm not scared to find out or say I don't know. The first time I had tiled roofs, the big tile shakes that are on some roofs, didn't have a clue about anything about them. So I called the contractor and I asked him. We sat down for lunch and we had a long conversation. Did a bunch of research and I'm pretty knowledgeable about tile roofing now.
RD: And you know what? That's why you have to hire a professional so they'll be able to tell you, "I didn't even know they do styrofoam roofs."
SB: Neither did I.
RD: That's insane. I'm like, "Yeah, that's real interesting."
SB: Yeah it's a styrofoam roof. It's significantly cheaper than a normal flat roof, however, it requires a lot of maintenance apparently.
RD: Oh really?
RD: Especially in our climate or is it indifferent in our climate?
SB: It's indifferent I think, but it all depends on how well it's installed and stuff. It was something new for me. I was quite shocked.
RD: How well? Key word right?
SB: Yeah no kidding.
When Should a Condominium Board Hire A Reserve Fund Study Specialist?
RD: When should a board hire a reserve fund study specialist and do an assessment?
SB: You need to do a reserve fund study every five years. And I just had this question asked me the other day, "Can you get us in before our reserve fund study expires? Can you get us our final before it expires?" Reserve fund studies do not expire. The Canadian government, and Alberta government, have said that the reserve fund study needs to be done every five years. You can not ensure that it's done five years to the date. Okay? So as long as you have your study booked and you get it done in the year that it needs to be done, that's good enough. And I recommend that boards actually go about looking for a provider to do a reserve fund study about six to eight months before they actually need it.
How Often Should a Reserve Fund Study Be Completed?
RD: In your opinion, is five years enough? Let me dig a little bit deeper. There are different types of developments right? So is five years enough for all types of developments, or should certain types of developments do the study more often, more frequently?
SB: You know I have a client that actually has their study done every three years.
SB: They choose that. It's a standard four story apartment building with an elevator and a parkade and they've chosen to do their study every three years. And I think that is a good thing that the boards know that they can actually do it earlier and if they have a lot of work done, they should get it done earlier. After doing studies for 12 years, five years for some of them, I've done several re-dos we'll call them, and nothings happened in five years.
RD: What do you mean?
SB: Like there's no ... like the roof has aged five years. Nothing significant has happened to the property, or to the finances to warrant them having a study sooner.
SB: In a lot of cases I think it should be up to the board to decide if they want their study done sooner than five years. New buildings, so for example, you have a building that has just been built and it has a reserve fund study done. Does it need a study again within three years no matter what the size? I don't think so. I think the five year mark is actually a decent number.
RD: Okay. But if somebody's uncomfortable they have the option of doing it earlier?
SB: You bet yah.
SB: Like I said, if you're doing a lot of work on your building in the three year mark then I would recommend that, once that work is done, then you do the study right after all the work is done.
SB: So a building envelope replacement, or a major window replacement, or a lot of landscaping done, anything that's a significant cost, and a significant cost to you. There is no set number of what a significant cost would be. That would mean then do another reserve fund study to get your finances back to where you think they should be, or where they need to be.
What's The Best Way To Find a Reserve Fund Study Specialist?
RD: Okay, so okay, perfect. So we know how often we should do it, what it includes. How do you go and find a reserve fund study specialist?
SB: Just call me. It's all good.
RD: And we will have your information underneath the video, and also we're going to include some bonuses if you're watching this, if you're interested and you want to see exactly what a reserve fund study should look like, I believe you're going to provide some samples as well.
SB: Yes definitely.
SB: How to get a reserve fund study provider? The best way to do that, you could ask your neighboring condominium corporations. So who's your neighbor beside you? Who did they hire? Were they happy with them? You can call CCI, they will give you a list. You can do an internet search. Just look a search for a reserve fund study consultant, or reserve fund studies, or anything like that. I don't think there's a listing in the phone book. Does anybody use a phone book anymore?
RD: Good question. Let's go check.
SB: I don't even own a phone book, so that's the best way to find them. My favorite is just by asking your neighbor to be honest. They're going to have a similar property that you have. I'm also a big advocate that you should not have the same reserve fund study provider three times in a row. Even if that provider is me, I know that's weird to say, and I do have clients that have used me three times in a row almost now. But I did a property a couple of years ago, and it was actually a high rise downtown here, and I did the study for them and they were like, "Oh this is really different than the last study." And just so a note, I actually don't look at the last study. The only time I will do that is if it's an extremely complicated building. Then I'll just have a look to make sure that I've gotten all the components.
But so I did this study for them and they're like, "This is really different. The financials are way different." The previous provider who had been doing the study for the last 10 years, so two studies before me, had not put any money in for the elevator in a high rise, or for the parkade membrane which is the membrane where the parkade goes past the footprint of the building. So those were two extremely expensive costs that they had not put any budgeting in for in the previous reserve fund studies. So again, we're not super human, we are just regular human and we should ... you know, somebody needs to check and balance us every once in a while. So even if you're happy with a provider, I strongly recommend that, every third study, you get someone else to do it.
RD: That's a good recommendation, I actually written down here. It's a good piece of knowledge to share. Let's say I've had a reserve fund study specialist do my reserve fund for the past three years and now I'm looking for somebody new. What should I be looking for in a provider?
What Should the Condo Board Look For When Looking For a Reserve Fund Study Specialist?
SB: The cost is the last thing on the list. The cost should be the least of your worries. You want to find somebody that can do a study that meets your needs. Do they incorporate phasing? Do you want phasing? Do they do a standard mathematical approach to your budget, or do they look at the people living in your condo and look at how the budget should reflect the unit owners? When can they do it? When do you need it done? Some companies have a year long waiting list. Who's doing it? This is my favorite one, there's several engineering companies that are engineering companies, but the people doing the reserve fund studies are not engineers. So you're paying the big bucks for an engineering company to do your reserve fund study, but you're not getting an engineer, so why would you hire one then? Correct?
That's pretty much ... do they come to a meeting? That's another thing, do you want them to come to a meeting and explain the study to you, or is that an extra cost? Will they come to an AGM, is that an extra cost? So you need to figure out what their services are and make sure you compare apples to apples, not apples to oranges. Okay?
Best Time To Look For a Reserve Fund Study Specialist
RD: Okay, pretty fair. Is there a better time during the year to do a reserve fund study than other times, or seasons?
SB: Well obviously you don't want to book your study to be completed in the winter time because I'm not going to be able to look at your roof, and I'm not going to be able to look at your asphalt or your sidewalks, but a lot of times, what I do is I do all my exterior site work for the winter, before it snows, so then all I'm doing is the interior site work during the winter months. Generally you're going to get a better cost if you book it just before winter and they come out and do the exterior site work before it snows. Summer months and spring months are obviously the busiest times, so don't call anybody and expect a reserve fund study in a month.
RD: Yeah that won't happen.
SB: It could happen but it's going to cost you a lot of money.
RD: Yeah, yeah, especially in condos. Condo boards are money conscious. They look at every single penny right because they have to go to the owners and ask for the money through condo fees or special assessments, however it's an expense that needs to happen right? Like you have to do it. I just had a question and I forgot it. Oh my goodness.
SB: I just had my favorite are developers honestly because they have no gage of time. They need a study and they need it now, so that's my favorite are developers.
RD: And my question came back to me.
SB: I know.
RD: So you're busy. How often-
SB: Well I'm not busy now.
RD: Right, now. Not now. But however, if somebody's looking to hire you for example, how far in advance should they try to book you or schedule -
SB: Well again, like I said earlier, you should really be trying to look for providers about six to eight months before you need the study.
RD: So if you're ... pretty much now.
SB: Right, so if you want your study done this summer, then you should be calling reserve funds study providers now. Now my biggest pet peeve is I've heard that to get a proposal sometimes takes a month. Realistically with the technology we have now with Google Earth and Street Shots and things like that and Spin, and being able to pull the drawings off the internet, proposals should not take more than a day or two to get to a client. I mean if you're waiting for a month for a proposal, chances are you're not going to be getting your reserve fund study anytime soon here.
RD: Anytime soon. Okay so pretty much-
SB: I mean myself, I'm booking right now for June.
RD: For June. So we're in winter, start looking for a provider to do your study if you need to do it next year.
RD: Pretty much.
SB: Oh yeah, if you're late 2018 then start looking now.
RD: Okay, awesome. Well I got some more questions for you Sharon but I think we're going to take a short little break, so we'll see you guys after a little commercial. See you in a bit.
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RD: Welcome back. So Sharon I have a question for you.
SB: I might have an answer.
How Can The Condominium Board Prepare For a Reserve Fund Study?
RD: Oh I hope you do. From a board's perspective, before or even during, or before the first consultation or the first meeting, is there anything the board can do to prepare themselves before you arrive? So everything's nice and smooth, we have all the information for you, you look at it, you pick it up, we go and then we get that proposal, that study, not six months from now, but within the next month.
SB: Generally how I work, once I start on a reserve fund study I actually have it finished in a month. Okay so start to finish it's done within a month. Sometimes that doesn't happen though because sometimes I have to wait for things, like financial information, or the inspection for the units, or the bi-laws, or anything like that. So the biggest thing you can do to get ready to do your reserve fund study is get that information together. Have your bi-laws ready, have your financial information ready, so that they know what you're contributing to the reserve fund account and how much is in it. Another to have do, and I do have some buildings that actually do this already, which is great, is they have a list of what's been done in the last five years, or 10 years, or 15 years. They have an inventory of what's been done, when it was done, and how much it cost.
So those make my life a lot easier, and that reflects in the price a lot of times. If you have, not condo plan drawings because we can pull those ourselves, but if you have as-build drawings, make those available to the provider. They are a lot more accurate than taking measurements on site, and your numbers and financial information will be a lot more accurate.
RD: So basically a lot of documents for one.
SB: A lot of documents. Be prepared to provide, not necessarily a lot, but I mean you have your financials, you have your budget coming up, you have your bi-laws, and you have people on the board that are willing to do the inspections. Most of the time with every condominium, we have to do three-four inspections of the interior of the units if it's not bare land. You know and to make arrangements for those. I mean I've had to do those three inspections on three different nights sometimes.
RD: Okay, so talk to your owners and get them on the same boat.
SB: Talk to your board members, talk to your owners, figure out whose available to do these inspections with and have all that information ready ahead of time.
RD: It always helps to prepare. Right, it always does.
SB: What is that saying? Your lack of preparation is not my emergency? Something like that.
RD: However, in the end it is, because people want things done yesterday at pennies.
SB: Yesterday costs. Yeah yesterday costs, most definitely. I usually give, if you have your as-build drawings, if you're in an apartment building and you have your as-built drawings, usually they're ... I usually give like a $150 to $200 discount because I'm spending less time onsite measuring.
RD: Oh definitely, okay. So Sharon do you have a specific process you go with the board when you're doing the study?
Sharon's Process For Doing a Study
SB: Oh my. So generally, once the proposals been awarded you get a lovely email from me saying, "Thank you very much. I will be contacting you near the end of April to arrange for your inspections in May." So once May rolls around, sorry once April rolls around, we'll set up an inspection date and I'll come out to your property and do all the exterior inspections. And then what happens is ... I mean that includes counting and measuring all of your common property. I may not be looking at every building if it's a townhouse project, but I'm going to be looking at it briefly because I have to make sure that I count all the windows, and count all the siding, and measuring all that thing. With apartment buildings I'm walking around that apartment building probably around five times in one inspection.
Then we do the interior and we measure all the common property in the interior of the building. We look at all the mechanical, balconies, things like that. And then I take all that stuff and I go back to my office, and I collaborate it all, and put it into spreadsheets, and make sure it's all aged appropriately. And then you get a report that says how much you should be putting away. And low and behold, sometimes I get these reports that come out that say, "These people are putting too much away." In the 600 studies I've done, that has happened maybe 20 times.
SB: So once you get the reserve fund study, it's a draft copy. Review it, ask questions, email me, phone me. I can even come to a board meeting, which is included in the cost of the study, to sit down with the board and go over the reserve fund study page by page, or just to answer questions, whichever they want to do. Then a final is completed and then we're done. And somewhere along in that process you pay me as well.
RD: Okay. So actually look up how much condos are contributed, which is a huge, huge issue.
SB: Sometimes that number's been pulled out of the air.
RD: Yeah. Sometimes there isn't enough right?
SB: Most of the time there isn't enough. The majority of the time, I'm going to say 75% of the time there is an increase of some amount. 10% of the time there's a significant increase, or large special assessment required. And then like I said, less than 5% they're doing okay or too much.
What Happens When The Condo Board Doesn't Follow The Reserve Fund Study Recommendations?
RD: Okay. And you know what? That's something I want to get into now, because what happens if somebody doesn't do a reserve fund study and follows the recommendations?
SB: Lots of people don't follow the recommendations. You know the short-term issue with that is nothing. Nothing is going to happen. Everybody's going to be happy because you're not increasing the condo fees and everything's going to be great. However, the long-term implication is that your building is going to fall apart. Plain and simple. Or your buildings if you're a townhouse project. I mean you're putting that money away to replace common property components that require replacement over a certain period of time. And if those components don't get replaced, what's going to happen to your property? It's either going to fall down, or you're going to lose excessive value on it.
SB: Ultimately you're going to have to special assess, ultimately.
RD: Exactly. That's what I'm getting into right?
SB: But sometimes condo corporations don't even do that. Sometimes they let the property deteriorate. I have done several buildings that have been left in a bad state. I mean there are condos that are rental properties and the owners do as little as possible to the building to maintain it. And so at some point that building is going to have to be torn down instead of where it should just be, you know windows replaced, roofing replaced, siding replaced, but they're not putting the money in, so it's just going to be demolished.
RD: Or they're going to have to put up a huge chunk of money right?
SB: Yes or the huge chunk of money and most of the time that's what happens, and nobody likes that huge chunk of money.
RD: And that's what tends to happen, not with all, but many apartment to condo conversions where they convert the building into a condo.
SB: And they change the carpet.
RD: And they don't have a reserve fund.
RD: Right? And then all of a sudden people get special assessment and go, "Well I just bought into a condo and I have to put up another 30-40-50K."
Does an Apartment To Condo Conversion Require a Reserve Fund Study?
SB: Well technically they're supposed to require a reserve funds study before they sell the first unit in a conversion. So when you are buying a condominium that is a converted building from a rental property, it's really, really important that you do look at the reserve fund study, because basically we're taking the developers word that they're contributing a certain amount, that there's this much in the reserve fund account. If there's not, there's going to be some major implications to the unit owners.
RD: Exactly and not a lot of unit owners, the new buyers, you know, finished school, getting my first property, moving in, they don't know what documents to look at. They don't know to review the minutes, the reserve fund, all that information.
SB: That's actually something I do as well Rafal is the document review for condo buyers. I've done probably about a dozen of them now. In the last couple of years I started doing that, and it is really simple because new condo buyers don't know what to read, and don't know what to look for, and don't know the signs if there's a problem. So I mean for somebody who understands condominiums it's very simple, and it's not an expensive thing either by any means.
RD: So you mentioned you do condo document reviews, what else do you do differently from other special reserve fund study providers?
SB: Well not differently. I also do audits. I do attic and window and balcony audits, and deck audits if necessary. One thing I do a little differently than other providers is that I work from home, and I am self employed, as well as only employed. So it's just me doing the reserve fund study. I don't consult everything out. I've been doing, again, I've been doing this for almost 12 years with a construction background, so I don't see the need to sub-consult something out that somebody's just going to go take a picture and tell me it's a boiler. So my husband actually helps me a little bit as well. He carries my ladder and pushes my wheel and measures asphalt and concrete. It's great. The other thing I do that some providers don't do, and there's been a bit of a controversy over this, is I actually use a drone on some of the roofs that are not easily accessible.
So if you have a standard townhouse building that I can access the roof with a ladder, then I will go up on the townhouse roofs and walk around the shingles and stuff. If you have cedar shakes, you don't want anybody walking on them, so the drone is really helpful with that. A lot of the three story apartment buildings don't have roof access as well. I've seen roofing contractors, and my competition put ladders on balconies to try to get up on roofs, and I find the drone is a lot safer and I get actually more information. I do use a drone, I do use a digital camera, of course everybody uses that, thank God for those because if we had to develop film I'd have to charge double. Generally I take about 300-400 pictures per condominium corporation, so yeah I would definitely have to charge double. I don't think I do anything a lot differently besides using the drone to be honest. I mean I do the site inspections and all the inspections myself.
RD: Okay. You know what? It's funny that you mention that because, over the summer, I was driving and I actually saw a ladder-
SB: Off a balcony-
RD: ... off a balcony-
SB: ... off a roof.
RD: ... and there was a gentleman climbing the ladder and I'm like, if he was to slip the wind would pick him up. The guy would go flying.
SB: My favorite is to get up onto the garage of the townhouse, and then take the ladder with you and take that ladder to get up on the second floor roof. And see these are really unsafe things I think, so using the drone you just ... and you actually get more information because, if I was going to put a ladder up and had a difficult time accessing the roof, I'm going to go on one roof if it's a townhouse project. With the drone, I'm going to take pictures and video of like 10 roofs. I mean with large apartment buildings I can get up there and look at the top floor, as well with the drone, of the stucco or the siding on the top floor, so the drone is really, really helpful.
How Can a Reserve Fund Study Specialist Use Technology To Their Advantage?
RD: And you know what? The technology is fantastic. I'm happy that you're actually using technology to your advantage, because with those drones the cameras are high definition. You can-
SB: Yeah you can zoom in like you wouldn't believe.
RD: ... you can zoom in. You can see everything, which is scary.
SB: Oh yeah.
RD: I'm just like, in my condo I'm just looking and you know making sure nobody's flying with a drone pointing the camera at my window.
SB: I don't look at anybody's windows with the drone.
SB: Mostly it's for the roofs that are inaccessible and unsafe.
RD: Okay, which is fantastic because you know what, when I saw that gentleman on that ladder, I'm like, "Oh God."
SB: It's like that one picture of that guy with the ladder in the pool changing the light. [crosstalk 00:31:59]
RD: Or two ladders, you know one ladder's stuck on top of the other.
SB: You know what? I'll use the drone.
The Difference Between a Reserve Fund Study Provided By a Consultant and an Engineer
RD: You know what? I'm happy you're staying safe. Sharon we have consultants that do reserve fund studies, we have engineering companies, what's the difference between the two and what's the difference in the reports that they present?
SB: Okay so a lot of times first of all, I've heard the term engineered reserve fund study and all that is, is exactly the same thing, but it's done by an engineering company.
RD: So more money?
SB: More money.
SB: An engineering company generally, like I tell everybody when they're looking for a provider is, find out exactly who is doing your study. A reserve fund study has no destructive testing so Rafal could actually do a reserve fund study. You could do one if you knew how to put everything together right, because it's just a visual observation of the building. So why would I have to be an engineer to look at a building right? When you have experience and you have understanding of the common property components, and you have the understanding of how the financials work, and the budgeting, and how long a component lasts, what difference does it make what your schooling is, because I'm pretty sure that it would probably make more sense to hire somebody who's been doing reserve fund studies for 20 years whose just a consultant, then somebody who's just got out of school who's an engineer.
Right? I mean experience means a lot more to me than a degree, right? And again a lot of the engineering companies, they say they're an engineering company and obviously they are an engineering company, but you're not getting an engineer doing the inspections. Again, it's just a visual look at the building. No destructive testing.
RD: Fair enough.
SB: One of the other things we get is, people ask a lot of times about, well why aren't you looking at every window in a building? Because if we had to look at every window, your study would cost thousands, and thousands, and thousands, and thousands of dollars. If you need something like that, you're looking at audits, and audits are generally where you take one component and look at all of it.
Components You Should Be Auditing
RD: So speaking of audits, what are the biggest components that you should be auditing more often than, or should you even be doing audits?
SB: Okay so what you should do audits for. Generally if your building is under 10 years old you're not going to do audits for anything unless you notice that you have something that's defective. What I've done audits for, I've done attic audits. So a lot of times when you're doing a reserve fund study the inspections are only, you're only going and popping your head into three attics in a townhouse property. So how do you know what the insulation is in the other 50, let's say, because they all vary? Did somebody add insulation on their own? The attic insulation generally in a townhouse property is common property, so you need to know what's in there. So to do an attic audit would be helpful. The person's going to stick their head in the attic, they're going to measure the insulation, determine what type of insulation is, determine the ventilation in the attic, that kind of thing.
Window audits. Window audits are actually only good if you plan on phasing your windows, so phasing the replacement, otherwise generally a standard window lasts 30 to 35 years. And if you're noticing that they're starting to fail, which means they're starting to leak, or fog up, or seep water, or wind, or anything like that, then you're going to just start replacing them all if they're all 30 years old. But if you need to phase it for financial reasons, which you really shouldn't do, that's when an audit comes into place because an audit will tell you which ones need to be done first.
SB: I've done deck audits. I actually did a deck audit on a property that was only five years old because the decks were deficient.
RD: Yeah I've seen those.
SB: The decks were rotting way ahead of time because the property was only about five years old. I had done the reserve fund study for them the year before and then they called me up and said, "Hey can you do a deck audit." You wouldn't necessarily do an audit for roofing. Generally it's a windows, decks and attics.
RD: What about parkades, parking lots?
SB: That would be more, not so much an audit because an audit is where you're looking at every component, so every window in every building, or every attic in every building. A parking lot or a parkade, if you see or notice or your reserve fund study stresses that you have an issue, you're going to hire a structural engineer to do a report for you. Plain and simple. I mean no ifs, ands, or buts about it. And make sure you get that structural engineer.
SB: Okay? Don't get a chemical engineer.
RD: Yeah I've seen very interesting individuals doing certain things in this industry so you have to be really careful, yeah.
SB: Unfortunately. I had a property manager phone me and say, "Hey can we just take out an elevator because we don't want to replace it, it's too expensive?"
RD: Oh yeah. Let's put up ladders. Let's put up ladders in the shaft and that's how people can-
SB: I'm like, "I know you have two, but no you have to replace the elevator okay." One of the other questions I come up with a lot Rafal is trees in landscaping. Sorry I was going to mention this to you earlier. One of the CCI lawyers that we deal with all the time has said to me several times that if nobody complains, don't replace it, or put a shrub in. A lot of people think that if they have to remove a diseased tree, that you have to replace it with the exact same tree and that's not correct.
RD: Okay, that's good to know.
SB: I mean unless somebody is going to complain really, you know.
RD: Actually I didn't even think about trees.
SB: Yeah it's a big thing you know. There's a landscaping component in the reserve fund study and it covers everything from trees, to grass, to grades and all that kind of stuff.
RD: See I thought it was just the building itself, the structure. Interesting.
SB: No, no, no, it's the whole property. It the whole property. Everything that's common property. So you look at your condominium plan drawing, and anything that's outside of the unit is common property.
SB: I mean an apartment complex, or even in a townhouse, everything outside the unit generally is the undecorated side of the drywall out. And then another thing that I get questions on all the time is, do we need a special resolution to change the wood fence to PVC?
RD: Okay and the answer is?
SB: Legally, yes. How's that? Legally yes you do. Whenever you're changing a component, and you have reserve funds study can recommend that you do a PVC fence instead of a wooden fence or whatever you have, but whenever you're changing a component type, unless that component type is no longer available, for example, the good old fashioned aluminum windows, we're putting the new vinyl PVC windows in, you don't need a special resolution for that. But when you're changing a component that has a replacement that's the same, you do legally need a special resolution.
RD: Okay, good to know. Well I knew, but maybe the others didn't.
SB: Maybe you guys didn't.
RD: Maybe the others didn't yeah. So I have one more question for you. What do people ask for during a proposal?
Questions During a Proposal
SB: What do they ask for? Well most people just say, "I need a proposal to do my reserve fund study."
SB: I mean and then I require a small few pieces of information. You know, the condo name, the plan number, the address, how many units, and the proposal is completed. It's not a lot, it's not rocket science. That's why I wonder why it takes so long for some companies to put proposals together. I mean are they going to the site, because that's what Google Earth is for right?
RD: Or they're so backed up that you're -
SB: Yeah they're so backed up that they can't ... exactly.
RD: ... just a number at the bottom of the list then, you know, you wait until they did you up and then-
SB: Realistically if you are waiting longer than a week ish to get a proposal done, I would not even worry about that company. Honestly.
RD: Good to know. And you know with this industry, it's underserved. And the people that come in to offer their services, you really have to watch out, especially the new people like ... you have to make sure they have the experience, they have the proper reviews, they've done the work previously-
SB: You know when you're getting proposals, ask for them to come and meet with you. You know, I think that's one of the greatest things, is having whoever's doing your reserve fund study, or you haven't even hired yet, but the people you've asked to give you a proposal to come and meet with you and sit down and talk with you, and see if you are not compatible, but if you like them because if they're a jerk, do you really want to work with them?
RD: And one thing is like-
RD: ... exactly, and another thing is that most of the time condo boards look at is the cost. And they make a decision based on this number right?
RD: There's more behind the cost than the number right.
SB: Way more than just the cost. It should be the least of your worries. Like I mean, obviously you want to get a value for your money, but always don't take the cheapest one because you're going to get the cheapest study. I remember several years back there was a company that, you took the pictures, sent them to them and they wrote the report for you.
RD: Oh really.
SB: Yeah and it was about $900 no matter what size of building you were.
SB: But it fits, I mean, I don't know how-
RD: And I guess those are the people you have to look out for right?
SB: Exactly. Like I said, I'm a firm advocate in, have the person come and talk to you and tell you what they're going to do and how they're going to do it.
Should You Follow Around a Reserve Fund Study Specialist During a Study?
RD: A question that just came to me. During an inspection, do you need a board director, do you need a condo manager at the inspection? Who would you recommend to attend the inspection with you?
SB: No one.
SB: I've had several times where people wanted to follow me around while I'm doing your building inspection. This is an annoyance. It actually adds more time to the inspection process, the chance of missing something, because I'm too busy speaking to you or explaining something to you is higher. I really like getting a set of keys and going into a building myself and knocking on doors and say, "Hi can I look at your windows?" With, of course, having those units know ahead of time, but having somebody walk around and do the inspection with me is not, or with any provider I'm sure, is not a good idea. It's too distracting. I will be more than happy to meet with you before I do the inspection for 15-20 minutes, or whatever, and discuss whatever you need me to know, or even after the inspection or at anytime.
I had one property that wanted me to have three meetings with them. And I'm trying to figure out how they wanted these three meetings, but we actually got all three in. But it's actually very distracting.
RD: Yeah I bet.
SB: But generally you can get a board member to give you access into the building, open some doors for you, and then I walk around by myself.
RD: Especially when you have somebody that you have to explain every single minute detail right. It's like, well you're there to do a job and need to focus on what you're doing instead of having the distractions coming in every few seconds right.
SB: Exactly, and with me, because I have my spouse working with me, sometimes he'll catch something, and if we have somebody with us, he's very hesitant to say something because he doesn't want to have to explain something, if that makes sense. And the same thing, I won't, maybe not say something because I don't want to have to explain it to them, I want them to see it in the study. If you're a townhouse and I'm doing your attic inspection, I have no problem showing you the pictures that I just took out of your attic if you want to see them while you're there obviously, but in general, it's not a great idea. Again, you can meet with the provider before, after, not during, but just not during the report.
RD: There are limits. You are there to do your job and you need to focus on your task at hand, and provide them the right report, the right study.
SB: There is only one time that it would be great to have the board walk around with you. I've done a couple of spring walk-a-rounds with some boards, and those are great tools because you're having somebody with a new set of eyes look at your building. I actually did a spring walk-a-round for a building that I hadn't even done the reserve fund study for. And I was like, "Oh look." That's when the board walks around and takes the pictures and you just point stuff out to them and let them know what needs to maintenance, or what maybe needs to be replaced even.
RD: I see, okay. Well Sharon I have no further questions for you. Is there anything you like to add? Anything I missed?
SB: Nothing really that I'd like to add, except that if anybody has any questions to feel free to contact me. I'd be more than happy to reply via email or phone to any questions anyone else would have.
RD: And we'll provide your information below the video as well as, we're going to share a sample of our reserve fund study, a couple of articles that you wrote for publications, and I will include your contact information as well. Anything else?
SB: No I think that's it.
RD: Okay fantastic. Well Sharon it's been a pleasure speaking with you today.
SB: Thank you very much Rafal, I enjoyed it.
RD: I had a great time today. I hope you guys learned something. I took some notes so next time you're looking for a reserve fund study and a specialist, a provider, you know the questions to ask, what to look for, and so on and so forth. Ladies and gentlemen it's been a pleasure having you on today's interview and I hope to see you on the next episode. Have a great day. Bye, bye.
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