Wednesday, September 16, 2009

Long-Term Capital Reserve Meeting

Tonight at 7 pm all of the parcel committees will meet at The Smith House with members of the Board of Directors, the Association's accountant Ed Guttenplan, its attorney Ron Perl, and Tom Truchan, Vice President of Finance for Signature Property Group. The purpose of the meeting is to discuss the community's policy regarding long-term capital reserves.


Owen Miele said...

I read the article titled “Princeton Landing Long Term Reserves” in the June 2009 edition of Princeton Landing Today where ideas were invited from the residents. The comments seem to raise the question whether the monthly charges were ever truly intended to fund all major structural repairs or maintenance of the infrastructure in the community? I think not! How would an additional $50 per month per unit for the foreseeable future fund all of the potential needs of the community without special assessments? It would seem that the only way that any ultimate potential issues involving things like road repair, drainage, irrigation and/or structural remediation can be resolved would be by some measure of special assessment anyway. Wouldn’t the Association rather collect and spend money to respond to such potential issues without negatively impacting marketability and property values? Isn’t that in the best interest of both the Board and the Community? Has the Board considered this both in their respective capacity as Board members and homeowners?
A friend of mine recently sold his house in the Gentry in Plainsboro for over $600,000. He sold it in less than a week. The assessed value of his house and his annual property taxes were about the same as ours in Parcel VI. Despite this fact, one of our neighbors, with the same model as ours, recently sold his house for less than $450,000. Do you think that the monthly charges of almost $500 had anything to do with this disparity in value? I do! My friend, while living in the Gentry, had to come up with his own special assessment if he needed to replace his roof, or encountered drainage issues. He did not however have to disclose significant monthly charges to prospective buyers.
Suppose everyone in the community adequately funded the long term reserves to respond to a worst case scenario. How would that help any individual homeowner in the community who was trying to sell their home? A selling homeowner would not only lose all of the money that they poured into the long term reserves via the monthly charges, but a savy prospective buyer would argue that funding such long term reserve interferes with their ability to pay the asking price, and fund a mortgage and property taxes. As a result, the asking price would probably have to come down. In essence, the ultimate buyer would be rewarded by paying less for a house that was significantly funded for capital repairs by the prior owner!
All things being equal, what difference does it make if major structural repairs, or maintenance of the infrastructure, are funded by monthly charges or by special assessments? The ultimate cost should be the same! The only caveat is that all homeowners should be advised at purchase that they will have to fund special assessments for capital improvements as necessary in addition to the basic monthly charges. But didn’t they have to do that anyway when they owned homes that were not part of a planned community? Perhaps this point of view should also be expressed to the community in our community newsletter?

Karen Stray Nolting said...

Thank you for your comment, Owen. Your message is being forwarded to the Board.