HOA Basics: Reserve Study

reserve studyIn determining how much should be paid in maintenance assessments each month, the Board of Directors must estimate how much the association is going to spend for operating expenses and how much it must save for future repairs and replacement of common area assets (reserves). A reserve study helps the Board know how much to set aside for those repairs/replacement and when those repairs/replacements are going to be needed.

State statutes require that community associations have an independent reserve study done every three years (prepared by an independent consultant or contractor with no connection or interest in the association). A reserve study:

  • Identifies the major components to repair, replace, restore, or maintain; and
  • Provides estimates for each component’s remaining life, cost of maintenance or replacement and the annual dollar contribution required to perform the work.

The Board considers the findings of the reserve study when they set the operating budget for the upcoming fiscal year, thus determining the monthly assessment. The study is a valuable tool that the Board and management company use in order to ensure that the association has the funds available to properly maintain and replace our common area assets when needed.

Questions? Contact your association manager.

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