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What is a Reserve Study?

I'm happy you asked...

Here's the elevator pitch...

A reserve study is a physical and financial analysis of the common area an association is required to maintain on a long-term basis. 

Here's what that means... 

Community associations (they go by many names, HOA is very common) are responsible for maintaining the common areas, among other things. A reserve study will identify when major expenditures can be expected in the common area, how much they will cost, and how to fund these projects. 

Reserve Studies are meant to be dynamic...

Now, no one is perfect, and since reserve studies are estimating future prices, it is important to know that reserve studies are intended to provide a general guide as to the most likely maintenance obligations needed in the next 30 years. There may be expenses not identified in the reserve study, there are a few ways they can be handled, and you should let your reserve provider know to determine the best strategy for your situation. 

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Reserve studies have

two parts

COMPONENTS

The components are the physical assets in the community that are identified in the reserve study. 

You can find these on the Component Identification Report. 

FUNDING PLAN

This is the magic of reserve studies. Funding plans let the reader know the current state of the reserves as well as a plan moving forward. There are numerous ways to arrive at the same destination, the same is true for funding plans. Our goal is long-term equitability. 

Is this a Reserve or Operating expense? 

If all four answers to these questions are 'yes' then it is most likely a reasonable reserve expense

1.

Is it an HOA common area maintenance responsibility?
(ex. not city, or homeowner)

2.

Is its life limited? 
 

3.

Is its remaining useful life predictable?

4.

Is the repair/replacement/
restoration/
maintenance cost above a reasonable threshold?

Phone:

951.296.3520

mail:

PO Box 890129
Temecula, CA 92589

©2021 SCT Reserve Consultants, Inc..