A Reserve Study may save more than your association’s finances – it may save lives!
Many associations struggle financially. It is difficult to correctly price association fees while keeping members happy. It is a difficult balance to find. The truth is that doing the job correctly is more important than anything else.
Last year a tragedy occurred in Surfside, Florida, due to poor maintenance and management. So naturally, a lawsuit was filed, and the trial’s outcome has sent shockwaves throughout the industry, scaring associations and their board members. As it should!
We are not comfortable attempting to use such a terrible event to create a need for our service, but another truth of the matter is that lessons need to be learned from this event to avoid future situations from occurring. It is an association and its board members’ job to “properly” manage the association and its assets.
Here are the facts surrounding the situation:
- The building collapsed with people inside
- The event occurred on June 24, 2021, at approximately 1:22 am
- The building had 12 floors with 136 units
- The ages of the victims were 1 to 92 years old
- The building was built in 1981
- 88 people died, and some reports 98
This is a tragedy by anybody’s standards. But lessons must be learned to protect others from becoming victims of similar mismanagement.
In April 2021, a $15M program for remedial work was approved but had not started before the building collapsed. Additionally, there were documented concerns dating back as early as 2018, but most likely due to the cost and possible special assessments, the people in charge failed to fulfill their duties resulting in this death toll.
The lawsuit’s outcome is that a settlement was announced on May 12, 2022, for approximately $997 million. This is the cost of failing to fulfill a fiduciary duty, and delaying routine repairs and maintenance can take more than money; it can take lives. Proper evaluations and reserve studies can help save lives by creating a safer environment for the residents or members.
The possible causes have yet to be accurately determined. Likely, they might not ever discover the actual cause of this tragedy. However, some alleged reasons listed are:
- Corruption during construction
- Insufficient reinforcing steel
- Forting land subsidence
Routine annual inspections and ensuring that reserve funds objectives are met and evaluated are critical to providing a safe community for the members and protecting the association and its board of directors.
We bless the victims and their families. Additionally, we think the parties involved did the right thing by offering a settlement and not creating more pain for the victims’ families than they have already experienced. Bless everybody involved.
However, for other associations, learn from this. Use this as an example of what not to do and take your positions seriously. Good homeowner association management should include an aggressive and disciplined reserve study and, most importantly, use the reserve study to properly and prudently secure funds for future expenditures.
To discuss the benefits of reserve studies in more detail, please call Kristopher M. Kern, RS at +1 314-637-0660 or email firstname.lastname@example.org