TimeSharing Today | Sep / Oct , 2024 Page 46
RESORT SOURCES
Compliance with reserve study mandates
By Gary Porter , CEO Facilities Advisors
In this article , I will summarize the intricate landscape of reserve study mandates , focusing on the nuanced understanding of cash flow dynamics and tailored financial strategies required for property associations .
I will explain how associations outside of Florida typically manage their reserve accounts with an eye toward major projects , leveraging special assessments or structured loans to distribute costs over time and alleviate sudden financial pressures on members .
This traditional approach has proven effective , particularly amidst rising inflation , enabling associations to align funding with lender support while avoiding the pitfalls of delayed repairs .
Understanding cash flow dynamics
In property associations outside Florida , the perennial issue of underfunding in reserve accounts remains a common challenge . Associations typically contend with the timing of major projects such as structural rehabilitations or extensive renovations .
The approach often involves considering options like special assessments or structured loans spread over several years to manage cash flow without burdening members with sudden financial demands .
This strategy has traditionally been effective , aligning major project funding with lender support , especially in recent years marked by inflation spikes that have made delaying repairs potentially more costly than borrowing at present rates .
Florida mandate : Structural integrity and reserve studies
Florida ’ s structural integrity mandate for resort associations presents a distinct and stringent requirement . Under this regulation , resorts must achieve full funding for eight critical components outlined in the structural integrity reserve study .
These components include roofs , load-bearing structures , fire protection systems , plumbing , electrical systems , waterproofing , windows , and any other item with deferred maintenance exceeding $ 10,000 . Compliance mandates resorts to reach 100 % funding readiness for these components when they reach estimated replacement or major repair dates , irrespective of the immediate need for repairs .
Financial strain on Florida resorts
The mandate poses a significant challenge , particularly for older associations that historically deferred funding obligations . Many now face substantial funding gaps , necessitating large-scale special assessments to achieve compliance .
Recent reports cite instances where associations have levied hefty assessments , such as $ 60,000 per unit , to meet mandated funding levels . This financial strain is exacerbated by the reluctance of financial institutions to extend loans without a spe-
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