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Be Aware and Plan for Rising Material Costs By: Andrew F. Meinert, Esq.

In recent years, the cost of construction materials has increased dramatically.  During 2020 when shelter-in-place orders were in effect, many manufacturing businesses were unable to operate, decreasing supply for materials like lumber.  At the same time, individuals began purchasing these materials at a greater rate to perform their own DIY projects with their newfound time at home.  While spending on these items increased, production and availability due to supply-chain problems decreased, leaving a significant gap between supply and demand.

Not only are expenses related to construction and repair projects skyrocketing, but other association-related expenses are as well.  The fuel price surge, along with a labor shortage for many businesses, have also resulted in an increase in service costs.

Unfortunately, these expense increases are impacting community associations significantly, and boards must be conscious of this reality when budgeting and planning future projects.  Everywhere a board turns, from utility bills to insurance premiums, association expenses are going up.  Boards must begin planning on how to mitigate these expense increases immediately.  For example, a reserve study from 2017 may project that replacing the common element decks would cost $50,000.00 in 2022, when the new reality is that the project will cost more than $80,000.00.  When these increases are multiplied across the entire budget of an association, the effects can be deeply troubling.

In addition to increasing the budget to address rising expenses, boards must be careful when signing construction or repair contracts.  Many contracts are open ended and allow the contractor to increase the price based on their own costs rising.   Another possibility is to negotiate the purchase of necessary materials now, so that they are available for when the project will be completed in several years.  With every community association across the U.S. impacted in some way by the rise of material costs, boards must acknowledge the facts and actively work to mitigate the effect on their association and its owners.

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