3 Things to Know About Your HOA Reserve Study

The HOA board member is tasked with many key responsibilities, and high atop the list is conducting a reserve study. In fact, many states require that HOA boards conduct annual reserve studies—and even in states where reserve studies are not required, they are most certainly recommended!

For the new board member, this might all sound rather daunting—but by breaking this topic into some basic concepts, it’s easier to understand what a reserve study is and how it should be carried out.

1. What is a Reserve Study?

The best place to begin is with a simple definition. Your association has several capital systems; these might include the pool, tennis courts, common areas, sidewalks, parks—basically, anything and everything that is owned by the association itself. Sooner or later, all of those things are going to break down or experience wear and tear. They are going to need maintenance, and eventually they might need to be replaced.

The questions to address, then, are these: How much will it cost to replace these items? And, how long will it be before you need to replace them?

An HOA reserve study seeks to address these matters, evaluating the lifespan of your association’s capital systems, and calculating about how much money your community should reserve each year for possible maintenance/replacement costs.

2. Should You Conduct a Reserve Study?

The next question to consider: Should your association be conducting regular reserve studies. Obviously, if you live in a state that mandates it, then the answer is yes. Even if it is not mandated, however, it is strongly recommended. A reserve study can help prepare your association for all possible financial outcomes, even the direst of emergencies. It also protects your board against any possible accusations of neglect, meaning it can significantly minimize your liability.

3. Who Should Conduct the Study?

Finally, who should conduct the HOA reserve study? We suggest speaking with your management company; if you don’t have one, call in a professional. A reserve study is only helpful if it is accurate and detailed, so why not have it conducted by the experts? Your HOA management team should prove more than willing to assist you in this critically important HOA work!

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