A Reserve Study is an analysis of those components either owned in common or for which a common interest subdivision (commonly referred to as a "Community Association" or a "Homeowners Association") has the responsibility to maintain. Typical examples include roof replacement, asphalt slurry, pool mechanical equipment, and other items as may be determined by the association's Board of Directors within the constraints of the association's governing documents.

The intent of this analysis is to determine exactly what those components are (if this has not already been accomplished), to determine the current and useful remaining life of these components, and to determine the replacement cost. These results are then used to determine a funding plan which helps assure that homeowners are providing adequate money for this repair and replacement, while at the same time trying to ensure that they are not collecting excessive amounts.

A Reserve Study is composed of two parts, a site inspection and a funding analysis. If your association is considering a professionally prepared Reserve Study, you should determine if you are buying both portions. Most firms, including ourselves, who prepare these studies as a significant part of their business will provide both portions since it is not only economically advantageous to the client, but also allows greater flexibility in resolving any funding issues which may exist.

Why Consider a Reserve Study?

Without a Reserve Study, there is a great likelihood that the association is either overfunding or underfunding its reserves. If the association is overfunding its reserve obligations, then today's homeowners are paying for more than their fair share of the wear on the property.

On the other hand, if they are collecting too little money, a shortage will eventually result which will result in deferred maintenance and/or special assessments. This situation typically has a significant impact on the property values and personal finances. Many states have passed legislation requiring Reserve Studies because of the impacts to homeowners caused by underfunding, and other states are sure to follow.