Your Building Has Deferred Maintenance. What Should You Address First?

From chattering boilers to flickering lights, many commercial buildings are operating with a handful of deferred maintenance projects. Now, with office buildings standing largely empty and multifamily residents spending more time than ever in their homes, building owners are under pressure to invest in their building operations and complete repairs they have been putting off.

But how can owners decide which projects to take on first? And how can building owners come up with a plan to not just tackle deferred maintenance, but finance it responsibly, in a way that keeps their costs predictable?

“You may have five projects that all seem critical, but of course it’s not possible to do everything at once,” said Pete Power, the president of Klein & Hoffman, a Chicago-based architectural and structural engineering firm. “It takes a detailed plan to make sure that each of them is going to be logistically feasible.”

Power oversees the Klein & Hoffman team that conducts physical needs assessments and reserve studies. Their studies deploy licensed architects and engineers to inspect buildings and gather all the knowledge they can about deferred maintenance projects. Then, the team translates that into a detailed road map to help building owners understand what needs to be done first and helps them determine how to set aside funds to undertake repairs. 

The Illinois Condominium Act of 1990 requires that associations provide for reasonable reserves for capital expenditures and deferred maintenance and typically requires that properties undergo a reserve study every three to five years. These sorts of studies can also be helpful for multifamily rental, office and industrial owners and any other groups that want to understand more deeply what maintenance costs are likely to arise within the coming decade, according to Klein & Hoffman Senior Associate II Thomas Flynn. 

“These studies are a tool that identify an order of magnitude for large-scale capital expenditures to help owners evaluate and plan,” Flynn said. “They are often the first step in a continuous process of evaluation, planning, construction and maintenance.”

While some repairs are extremely pressing, such as a crumbling facade or a roof that is leaking water into the units below, other repairs may be longer-term projects. A great deal of the Klein & Hoffman team’s job, Power said, is to determine how long owners can expect repairs or functions of their buildings to last once they’re completed.

“We’re there to work with our clients to make sure they can accomplish all of their goals within their limitations,” Power said. “We can provide options for how and when the work gets done.”

The first step to creating a reserve study or other physical needs assessment is to review pertinent documents. Roman Wachula, a Klein & Hoffman project architect, said he can learn much of what he needs to know by examining maintenance contracts, recent repairs and reports from the building concerning elevator systems, boiler rooms and roofs. Even before he sees a building in person, Wachula has a strong sense of what projects are most urgent, because he’s spoken to both on-site and third-party maintenance teams and pored over drawings to identify deficiencies and problem areas.

Next comes a walk-through of the building and interviews with property managers and any other staff who might know about issues. Wachula said his team takes copious notes and photographs not just inside the building, but on the roof and of the walls.

“It helps to have a deep understanding of structural engineering and architectural knowledge here,” Wachula said. “Having done both the assessment and repairs on numerous buildings, we can often identify the major issues at hand with a single walk-through.”

The real work begins back at the Klein & Hoffman office, where Wachula and his team catalog the various capital expenditures that the building needs and translate that into a recommended timeline of tasks. They then work with the building ownership to understand what financial steps the building needs to take to cover the work, examining reserve funds and seeing if any adjustments need to be made. The final report gives the building owner a road map to completing deferred maintenance and ensuring funding for future needs.

The good news for owners is that many deferred maintenance projects can also improve the performance of a building, saving money down the road. Upgrading roofing, windows, insulation and HVAC systems will all help lower utility usage and defray the long-term costs of maintenance.

Power added that physical needs assessments are not solely for current owners. Prospective buyers of a property might also commission the Klein & Hoffman team to inspect a building to get a deeper understanding of its physical needs, which could alter net operating income over the coming years. If a serious issue comes to light, like a boiler or ventilation system on its last legs, Power said, it can severely change what a prospective buyer might be willing to pay, and owners can also commission studies to show buyers in good faith what to expect.

“Buildings are always going to deteriorate,” Power said. “They don’t sit around and get better, they have a tendency to fall apart. Without inspection and plans for repair, it’s difficult to predict when deferred maintenance will come back to bite you.”

This feature was produced in collaboration between the Bisnow Branded Content Studio and Klein & Hoffman. Bisnow news staff was not involved in the production of this content.