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Q&A: Error of Omission?

Q&A: Error of Omission?
Q Our association recently had to replace a pool safety cover. It was 14 years old and just could not be patched anymore. We got quotes for the cover and selected a vendor. Thinking this replacement would be funded from the reserve funds, we ordered the cover. A resident, at a meeting, said that we could not use reserve funds as the pool cover was not included in the engineering study. Upon looking at the study we found the cover had been omitted in error. Everything else was included in the report, pump, filters heater etc. There is more than enough funding in the operating account as well as in the reserve account to cover the cost. Is the board allowed to use the reserve funds even though the cover was not mentioned in the report? Must we get a new study done just to include the cover? Thank you for your assistance.

— Deep Cover

A “In regard to Massachusetts state law, the short answer is ‘yes,’ the reserve funds may be used to replace the pool safety cover,” says Gary M. Daddario, an attorney and partner at the law firm of Winer & Bennett, LLP, in Tyngsboro, MA. “While the association has a legal obligation to maintain an adequate reserve fund, it does not have a legal obligation to perform an engineering study. In other words, your association could operate and be in compliance with the law even if it had not procured the engineering study you referenced. That said, engineering studies are a good idea and one of the best ways to properly plan for the future needs of the association.

“But where, as here, the engineering study falls short of the association’s reality (particularly in an instance like this that appears to involve a clear omission), the association need not act strictly in accord with the terms of the study. Since replacement of the pool safety cover is an appropriate type of reserve account expense, the expense may be covered by the reserve funds notwithstanding that the study does not include this detail. Of course, it may be wise to update the study going forward. In addition, if the board wishes to keep the association on track, in a strict sense, with the funding plan laid out in the engineering study, then the board could replace the pool safety cover with a ‘loan’ from the reserve account. If properly documented, it is generally considered to be an acceptable practice for the board to ‘borrow’ the association’s own funds from a reserve account and to establish a pay plan for returning the funds to the account. If you both update the engineering study and take an ‘in-house loan’ for the immediate expense then: 1) in the short-term you can meet the physical needs of replacement of the safety cover; and 2) in the long-term, your association will end up in compliance with the funding plan from your study.”

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