Deal or Value?
January 2015

Happy New Year and welcome to our first newsletter of 2015!

A new Condominium Property Act was passed in Alberta late last year and we are now awaiting revised regulations. It’s been fifteen years since the Act was last revised, which means that in 2015 many Alberta condominiums will be completing their 4th legislated reserve fund study. Because of this we expect another busy year and recommend getting your reserve fund study RFP’s done early in the year.

In this month’s newsletter we discuss the cost/value relationship of Reserve Fund Study providers, along with a few condominium related website links.

As always, we look forward to your thoughts and comments.
Regards,
Ernie Paustian
Ernie Paustian


Deal or value?

Property Managers have many choices available to them when sending out requests for proposals. There are a wide variety of experienced Reserve Fund Study providers, including many new entrants, with healthy competition being good for the industry.

There can also be significant differences in how reserve fund planners complete the Reserve Fund Study and report. The level of due diligence when completing the study varies, along with variations in experience and education, even among providers with the same designations. Have you ever seen something similar to?

Our consultants have completed over 1000 reserve fund studies “and insert one of the following” (site audits, insurance appraisals, building reports, home inspections, etc.) It might be a great marketing ploy, until the Condominium Corporation finds out that the company has completed very few reserve fund studies but many of the whatever “and” is.

Most often, there is a difference between the price paid and the value received, and hopefully cost is only one of the determining factors in choosing a provider. It’s important to ask if the cost is reasonable given the complexity of the assignment. However, some condominium corporations will almost always go for the “deal” and choose the lowest bidder.

No one wants to spend more than is necessary. If the fee being charged is unrealistically low, questions should be asked if any steps in the process are being skipped. Is a reasonable amount of due diligence being completed or does the “deal” provider simply not have enough expertise to properly complete the assignment?

Conversely, if the Condominium Corporation goes with the higher bidder based on the assumption that a senior planner will complete the assignment, and a junior team member does most of the work, are they still receiving good value? While it’s great that the company team is identified in the proposal, it’s more important to identify who will actually be doing the work, thus allowing the Condominium Board of Directors to identify value.

Some questions to ask:

  1. How much of the firm’s overall business that is dedicated to reserve fund study preparation and how long has the firm been providing Reserve Fund Studies?
  2. What are the qualifications of the individual performing the study? Is the planner invested and actively involved with various industry associations and organizations?
  3. Are junior staff completing the work, or the senior consultant?
  4. Does the provider have adequate insurance coverage for the work being completed, are there any limitations?
  5. Has the provider previously completed similar properties?
  6. Does the provider provide recommendations on minimum funding levels?
  7. Is the provider able to provide options on funding models?
  8. Does the planner keep current with changes in the industry, as well as the legal, legislative and technical updates that occur?

As promised, a few condominium related links:

This project would present an interesting challenge for most reserve providers

Court decisions shed light on when condo directors require owner approval for projects

Developers build bigger condo units to attract growing families and downsizers

Penhorwood’s troubled condos to come down in Fort McMurray

Thank you for taking the time to read our newsletter. At Delta Appraisal, we work with Property Managers and Board Members to set realistic budgets and to prioritize maintenance and repair projects. Our functional Reserve Fund Studies are unbiased as we are not competitors in maintenance, project or property management.


For more information about Delta Appraisal and our easy to read Reserve Fund Studies or to request a no-cost, no-obligation proposal, please contact us.

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