What is a Reserve Study and Why Does My Association Need One?

Jim Moore, RS with Advanced Reserve Solutions, Inc.

A Reserve Study is a financial plan for funding the future replacement of major common area components in an association.  Roofing, exterior paint, streets, and pools are some examples of common areas that are shared by homeowners in an association.  Maintaining these common areas in order to preserve or improve the property values requires setting aside a portion of your association fees into a reserve fund. A Reserve Specialist gathers essential information from the association’s board or manager in addition to conducting a site inspection that aids in quantifying common area components as well as determining the estimated remaining life of each component.

The Reserve Specialist looks at things like the total of cash reserves currently set aside, the condition and remaining life of each component and the estimated current replacement cost of major components. He then prepares a budget for the association's reserve fund to ensure that when the major components have reached the end of their useful life there is money to replace or repair the component.

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