Is it a good idea to include landscape items in reserve study? In many states, homeowners associations must perform reserve studies and keep well-funded reserve accounts. While the reserve study typically covers non-living components such as roads, roofs, and pipes, there is a question of whether or not the same study should also contain landscaping components.
Should You Include Landscape Items in Reserve Study?
A reserve study functions as an essential capital planning tool that determines the current health of the reserve fund and establishes a funding schedule to cover the cost of deterioration of common areas and elements. Homeowners associations refer to the reserve study to gauge the estimated useful life of components, calculate the cost of repairing or replacing those components, and determine how much they need to have in their reserves at any given time to pay for these costs.
For example, if the roof of a clubhouse is due for a replacement in 10 years and the cost of that replacement is $10,000, then an HOA should have that amount in its reserves upon the 10-year mark. This would mean following a funding plan and contributing $1,000 annually for the next decade. Of course, this is the simplest example of a reserve study’s role, as communities typically have a diverse range of assets and components to consider.
Normally, a reserve study should include all the physical components the HOA owns or is responsible for. While landscape items such as trees and bushes are not considered components traditionally, they are part of an HOA’s common areas. This begs the question of whether or not an HOA should include landscape items in the reserve study.
In general, including “landscape renovation” and “tree work” in the reserve study is wise. However, it is worth noting that many HOAs include landscape maintenance fees in their operating budget. However, the HOA board should factor those into the reserve study for larger expenses that don’t recur yearly.
Keep in mind that a handful of states require associations to conduct reserve studies. Florida (some associations) and Nevada are two examples. Apart from state laws, though, an association’s governing documents may also require a reserve study.
Landscape Renovation in Reserve Study
Larger communities or associations with many landscaping elements should include landscape renovation in their reserve studies. These communities tend to have trees, bushes, and other plant life, which means they are more likely to spend money on services like pruning, trimming, and general upkeep. Understanding how often such services are needed and how much they cost will help associations include them in their financial plans.
Again, the reserve study should generally include large expenses that don’t occur every year. A good example is pruning, which takes place every 3 to 5 years and can cost upwards of $50,000. If an association also wishes to update or upgrade its landscaping work after 5 to 10 years, the reserve study should reflect that.
In addition to landscape renovation, the reserve study should also contain plans for landscaping irrigation. Standard reserve studies typically include irrigation as one of the inspected and evaluated components, as they have more predictable useful lives and maintenance schedules.
Tree Work in Reserve Study
Trees and bushes may not seem to require major maintenance or work because they stand the test of time. However, such vegetation also has a limited lifespan. Bushes die off and can outgrow their spot. Trees tend to be sturdier and longer-lasting, but they need extensive work every few years to avoid damage and prolong their life. Trees require corrective pruning every 3 to 5 years, which can cost a lot of money.
HOAs and condominiums should hire an arborist for trees and foliage to perform a comprehensive inventory and study. The resulting report should tag every tree, allow easier tracking, and reflect a consistent maintenance schedule. This will cost money, so an association should set aside funds in its reserves according to the plan.
Should HOA Insure Trees?
Believe it or not, some insurance providers specifically offer coverage for trees. However, trees that don’t generate income will usually have limited coverage for fire, lighting, vehicles, theft, vandalism, explosion, aircraft, and riot claims. Most of the time, vehicle damage is the source of the claim. However, insurance providers don’t tend to approve wind, freezing, and pests claims.
Additionally, insurance policies don’t insure trees for value. Instead, they offer replacement trees in standard nursery sizes. For example, if an HOA has a 30-foot tree that gets struck by lightning, insurance will typically only cover an 8-foot replacement. A good rule of thumb when insuring trees is to opt for a $5,000 coverage.
Avoiding Tree Damage
Pest infestations are a common cause of tree damage and early deterioration. And since insurance does not typically cover pest-related damage, an HOA should invest in preventive measures. To avoid pest or insect infestations, associations should consider using durable native trees with significant pest resistance.
If an HOA community already has trees prone to pests or insects, hiring an arborist for advice on proper preventive maintenance is best. Alternatively, the HOA board may cut down the existing trees and replace them with pest-resistant ones.
The Importance of Landscaping
Some might wonder why investing in landscaping or allocating a portion of the reserves to landscape items is even necessary. While some disagree, landscaping offers several benefits.
- Attract New Buyers. Good landscaping that frames homes and common areas well can attract potential buyers. The right plants and color palette can instantly beautify an otherwise drab-looking space.
- Satisfy Existing Residents. Attractive landscaping not only pleases new buyers but also existing residents. Residents feel more at home and more inclined to appreciate their community when it is visually appealing.
- Protection and Comfort. Large trees provide shade on hot summer days and offer much-needed solace in less-than-peaceful weather.
- Maximize Curb Appeal. Even the simplest form of landscaping can add a layer of beauty and instantly elevate a neighborhood’s appearance.
- Enhance Property Values. Good landscaping can have a positive impact on property values. For homeowners, preserving their investment is a primary goal.
The Bottom Line
The answer to including landscape items in reserve study is not always cut and dry. It ultimately depends on the specific HOA’s situation and whether or not it has any landscape items or trees to begin with. That said, it is wise to include landscape renovation and tree work in the reserve study, especially if such expenses don’t recur annually.
Cedar Management Group assists with reserve planning. Call us today at (877) 252-3327 or contact us online to learn more about our services!
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