CRM CRM Maintenance & Capital Improvements 1 — Questions and Answers
Question 1: What is the primary purpose of a capital reserve fund in residential property management?
- To cover day-to-day operating expenses
- To fund long-term major repairs and replacements (Correct answer)
- To pay monthly utility bills
- To compensate property managers
Correct answer: To fund long-term major repairs and replacements
A capital reserve fund is set aside specifically to finance major long-term expenditures such as roof replacement, HVAC systems, and structural repairs.
Question 2: Which document outlines the schedule and estimated costs for major component replacements at a residential property?
- Lease agreement
- Preventive maintenance log
- Reserve study (Correct answer)
- Certificate of occupancy
Correct answer: Reserve study
A reserve study analyzes property components, estimates their remaining useful life, and projects future replacement costs to guide reserve fund contributions.
Question 3: A property manager notices the HVAC system is 18 years old with an expected lifespan of 20 years. What is the most prudent action?
- Wait until it fails before budgeting for replacement
- Begin planning and budgeting for replacement in the near term (Correct answer)
- Immediately replace it regardless of condition
- Reduce reserve contributions to save money
Correct answer: Begin planning and budgeting for replacement in the near term
Proactive planning for imminent end-of-life equipment avoids emergency expenditures and allows for competitive bidding and proper reserve funding.
Question 4: Which of the following is considered a capital improvement rather than a routine maintenance expense?
- Replacing a broken window pane
- Repainting a single apartment unit
- Installing a new elevator in an existing building (Correct answer)
- Fixing a leaky faucet
Correct answer: Installing a new elevator in an existing building
A capital improvement adds value, extends useful life, or adapts the property to a new use, such as adding an elevator that did not previously exist.
Question 5: What is preventive maintenance in property management?
- Repairing items only after tenants complain
- Scheduled inspections and servicing to prevent failures before they occur (Correct answer)
- Hiring contractors on an emergency basis
- Deferring all repairs until year-end budget review
Correct answer: Scheduled inspections and servicing to prevent failures before they occur
Preventive maintenance involves regularly scheduled servicing of equipment and systems to identify and correct issues before they become costly failures.
Question 6: When selecting a contractor for a major capital project at a residential property, which practice best protects the owner's interests?
- Selecting the first contractor who responds
- Obtaining at least three competitive bids with detailed scopes of work (Correct answer)
- Choosing the contractor with the lowest bid without reviewing qualifications
- Awarding the contract verbally without a written agreement
Correct answer: Obtaining at least three competitive bids with detailed scopes of work
Soliciting multiple competitive bids with clearly defined scopes of work ensures fair pricing, quality comparison, and legal protection for the property owner.
CRM CRM Maintenance & Capital Improvements 1
What is the primary purpose of a capital reserve fund in residential property management?