How to Plan for Major Repairs and Replacement Costs

Every building contains a small number of expensive things that will need replacing, none of
which will announce themselves in advance. The lift. The roof. The pumps. The generator. The
main water storage. The car park surface.

A committee that has not thought about these has, in effect, decided that whoever is in charge
when one fails will deal with it. That is a decision, just an unexamined one, and it typically
produces the worst available outcome: an urgent demand on residents, at short notice, with no
time to get competitive prices.

Planning for this is not complicated. It is mostly a matter of doing it at all.

List the expensive things

Start with the list, not the money. Walk the estate and write down every item that would be a
significant unbudgeted expense if it failed.

Keep it short — ten to fifteen items covers most estates. You are not inventorying the building;
you are identifying the things that could trigger a crisis.

For each one: roughly what it would cost to replace today, and roughly how much life you think
it has left. Both are estimates. Recording an honest guess is enormously better than recording
nothing, and the guess improves as you learn.

Work out the annual number per item

For each item: what it would cost to replace, minus what is already set aside for it, divided by
the years you think you have.

That is the amount that item needs each year. Add them up across the list and you have the
annual figure the estate should be putting aside.

Almost every committee doing this for the first time finds the total higher than what they are
currently collecting. That gap is the finding. It is uncomfortable and it is far better known
now than discovered by a failure.

Treat the result as the floor

The arithmetic above uses today's prices, assumes your life estimates are right, and ignores
what the money earns while it sits. All three of those push the real requirement upward, not
downward.

So the figure is a floor rather than an answer. Present it that way, or a committee will treat
a shortfall of a few per cent as comfortable when it is not.

Get the life estimates improved

Your own guess about remaining life is the weakest input and the easiest to improve. When a
contractor is on site for something else, ask what condition the major plant is in and how long
they would expect it to last.

Write the answer down with the date and who said it. Three such notes over a few years are worth
more than a single formal assessment, because they show a direction rather than a moment.

Watch the small repairs for a signal

An item that is generating an increasing number of small repairs is usually telling you
something about its remaining life well before it fails.

This only becomes visible if maintenance records are filed against the item rather than only by
date. Cost history per asset is what turns "the pumps seem to need attention a lot" into a
documented trend, and that trend is the most persuasive argument available for funding a
replacement before it becomes an emergency.

Decide the shortfall deliberately

Where the fund is behind, the options are narrow and worth naming explicitly: increase
contributions, extend the asset's life by maintaining it harder, plan to borrow, or accept the
risk knowingly.

All four are legitimate. What is not legitimate is not choosing, because the default is the
fourth option taken without anyone agreeing to it.

Put the choice to the committee with the numbers attached, record what was decided, and revisit
it annually. A committee that knowingly accepts a risk is governing; one that has never seen the
figure is not.

Review once a year, before setting the charge

Read the list before the contribution rate is set, not after. That ordering is the whole point
— the rate should follow from what the building needs, and it can only do that if the
requirement is known first.

An hour a year, with the list in front of you, is the difference between a fund that is roughly
adequate and one that is a pleasant assumption.