What is an HOA Reserve Study?

If you live in or serve on a Board of Directors for a Homeowners Association (HOA) you have likely heard of a document called a reserve study.  A reserve study is a capital budget planning document that reviews and outlines the status of the association’s reserve account and provides a clear funding plan.  This is to avoid sudden and large expenses that could result in special assessments or a sudden hike in association dues. 

The reserve study should consist of two main components:

The review of the physical reserve components within the community.  All physical components of the HOA property for which reserves are set aside for should be reviewed on a regular basis (every 3-5 years is the typical recommendation) for their current state and the possible timing that that component will need to be repaired or replaced.

The financial analysis of the current association reserve account and expected future costs.  Taking the above physical review into account, the financial analysis will outline the expected costs of the repairs or replacements that will be needed.  These figures are based on current actual labor and materials pricing, with additional inflation rates included.  The analysis will also include a review of the associations current reserve accounts and put together a realistic funding plan to make sure the association is in line with the study.

Ideally, the reserve study vendor that you choose to work with should assign an actual engineer with history in the industry to be the person conducting your study.  The Board of Directors should be reviewing the first version of the reserve study to be sure that all components are outlined and reviewed.  Once completed, the final study should be electronically shareable for ease of sharing with owners and posting to your community website. 

For more information on reserve studies, or for recommendations on the leading vendors in the industry, reach out to us today!