Depending on the size of your building, you'll run into an array of maintenance, repair and improvement projects that need to be completed. These can range from smaller maintenance activities like painting and cleaning in common areas or landscaping, pool and elevator maintenance and other day-to-day work, to capital improvements, which are major repairs and upgrades to the building and surrounding property. Here's a closer look at understanding these critical distinctions:
· Categorize the repair properly: How a repair is categorized will impact how and where you find the funding for the project. Maintenance is how you keep a building and property in its original condition, whereas capital improvements are designed to add value to your asset. Maintenance is a routine expense and is written into your corporation's yearly budget, whereas capital improvements are made to improve the market value.
· Know the specific definition of maintenance: Maintenance is typically defined as what you need to do to either restore a building to its original condition (painting a hallway that's getting dingy), prevent further deterioration (sealing up cracks in the walls), or replacing something at the end of its useful life (for example, lightbulbs). Cleaning the pool is routine maintenance, but adding or expanding a pool would be considered a capital improvement.
· Know the specific criteria for capital improvements: Corporations should understand that when a repair, improvement or addition increases the property's market value, it's a capital improvement. That can involve modernization of the building's internal systems, such as the elevators, or installing energy-efficient windows, electrical systems and more. If it would make it more appealing to a buyer on more than an aesthetic level, it may be a capital improvement—but that's not a strict rule.
· Understand when maintenance turns into capital improvements: Sometimes routine maintenance can turn into a capital improvement, and it's important to recognize where that line is. It will likely differ from situation to situation, but a good rule of thumb is that if a simple repair reveals a need for extensive improvements that will increase the asset's market value, it is probably a capital improvement, and you'll need to treat it as such.
· Learn about "useful life": Useful life is the amount of time you can reasonably expect a component to last. Whether that's a small object like a lightbulb, or a bigger one, such as your elevator's mechanical system, the lifespan will vary. Corporations may be able to extend an object's useful life, but that could change its classification.
· Take a case-by-case approach: The best approach to every improvement is taking it on a case-by-case basis. Take care to carefully review and classify each repair.
If you're interested in learning more about capital improvement funding for your condominium corporation, Imperial Properties can help. We pride ourselves on effective condominium management, and our expertise, knowledge and efficiency are sure to make your property a great place to live for all of your residents. Contact us today to find out more about how we can help manage your condominium property.