One of the primary business duties of Community Associations is maintaining and preserving property values of the Associations common property. To do this properly, Associations must develop funding plans for future repair or replacement of major common-area components. A Reserve Study is a budget-planning tool that identifies the current status of the Reserve fund and establishes a stable and equitable funding plan to offset the anticipated future major common-area expenditures. The Reserve Study consists of two parts: the physical analysis and the financial analysis.
There are many benefits to having a Reserve Study done. First, it meets legal, fiduciary and professional requirements. It provides for the planned replacement of major items that must, at some point in time, be replaced, as major items deteriorate during use. It minimizes the need for special assessments. And lastly, a replacement fund enhances resale values. Following are things to keep in mind when planning your Reserve Study.