Learn more about how your Homeowners' Association Reserve Study.

What is a Reserve Study?
A Reserve Study is the art and science of anticipating, and preparing for, an association's major common area repair and replacement expenses. Partially art, because in this field projections are made about the future. Partially science, because a study is a combination of research and well-defined computations, following consistent National Reserve Study Standard principles.

What is a Reserve Plan for?
A reserve's financial contributions are not for "future" needs. Reserve contributions are designed to offset the ongoing, daily deterioration of reserve assets like streets and sidewalks. Done well, a stable, budgeted Reserve Plan collects sufficient funds from the owners who use those assets so the association is financially prepared for the irregular expenditures scattered through future years when assets eventually require replacement.

What physical assets are funded by Reserves?
The national standard four-part test determines which expenses should appear in a Reserve Component (asset) List.

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1) The component must be a common-area maintenance responsibility

2) The component must have a limited life cycle

3) The remaining life of a component must be predictable

4) The component must cost more than 0.5% of an association's budget

How are "Useful Life" estimates of Components (assets) determined?

1) Visual Inspection (observed wear and age)

2) Association Reserves database of experience

3) Client History (install dates & previous life cycle information)

4) Vendor evaluation and recommendation

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How much Reserves are enough?

A Reserve is considered adequate when the amount of current Reserve cash meets the needs of the anticipated value of asset deterioration (the future needs of the association). Each year the Reserve Fund Balance is compared to the estimated deterioration of those assets and expressed as a percentage. An association needs to aim for 70-130% funding in order to avoid future special assessments or deferred maintenance.