Reserve Studies

The objective of an HOA reserve study is to recommend the minimum annual reserve contribution rate made by a condominium association to its reserve account. State guidelines encourage every condominium association to establish a reserve account to fund major maintenance, repair and replacement of common elements, including limited common elements that will require major maintenance, repair or replacement within 30 years.

The reserve study for HOAs is intended to provide adequate funds for the replacement or major repair of any component of the property as it becomes necessary. It is a budget planning tool which identifies the current status of the reserve account and a stable and equitable funding plan to offset the anticipated future major common area expenditures.

As part of the HOA reserve study, each reserve component included is evaluated to determine the current condition, the remaining useful life and the estimated replacement cost. This information is then synthesized into a spreadsheet format which determines the annual contribution rate needed to avoid special assessments in the future. All costs and annual reserve balances are shown both in constant dollars and adjusted for annual inflation and interest earned. Ideally, an even level of contributions is established that maintains a positive balance in the reserve account over the life of the study.