Reserve Studies 411

by Beth Mulcahy, Esq.

Our association board is considering hiring a company to prepare a reserve study but we aren’t really sure what a reserve study is. Can you define a reserve study for us? How much do reserve studies cost?

A reserve study is a budgeting guide that provides a comprehensive plan that shows an association how much is reasonable to place in reserve for a specific replacement or maintenance project. When properly executed, it can give a clear picture for the maintenance, repair or replacement requirements of association assets for the life of the association. A reserve study starts with an accurate inventory of the community’s assets to determine the useful life of said assets and a review of the association documents to determine the responsibilities of the association regarding property and assets.

A reserve study should provide:

  1. A detailed inventory of association assets that are labeled as assets for the reserve account;
  2. Location of the assets;
  3. Current age and remaining life of each asset creating a time line for scheduled repair, maintenance or replacement;
  4. The cost to replace each asset when necessary;
  5. The costs of repair or maintenance, ie. painting association fences; and
  6. A calculation of the monthly contribution required to have proper funding for repair, maintenance or replacement when needed.

Arizona law currently does not require an association to obtain a reserve study. However, it is in the best interest of an association to hire a qualified and licensed company to assist an association with a reserve study. Reserve studies cost in the range of $800 to $5,000 depending on the amount of amenities in your Association.

For more information on this topic, view our Cheat Sheet “Reserve Fund 411” by clicking on this link: http://mulcahylawfirm.com/news/Reserve%20Fund%20411.pdf

Please email Beth Mulcahy, Esq. for a free copy of a sample reserve study and for names and contact information for reserve study specialists.

This entry was posted in Board of Directors, Community Association Law, Homeowner Associations, HOA, Finances, Financial and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *