A reserve study assesses all significant assets that an HOA or
condominium is responsible for maintaining. It includes an analysis and inspection
of all the community's common elements such as roofs, fencing, mechanicals,
concrete, and much more. According to the Condominium Act (1998), all existing
and new condominium corporations should have a Reserve Fund. This article
highlights some of the critical aspects of a reserve fund study.
1.What is the
purpose of a Reserve Fund Study?
A reserve fund study ensures that the condo
reserve fundis well-financed
to make significant repairs or replace the Condominium corporations' common
elements or assets. It is used to evaluate how much life the assets have left
and how much it is likely to cost when they wear out. Having a reserve study
fund mitigates the need for a special assessment.
2.When should a
Reserve Fund Study be done?
A study is valid for one year. However, depending on the
community's assets, the study should be updated every three to five
3.Who is allowed to
prepare a Reserve Fund Study?
Engineers or architects are qualified to prepare a Reserve Fund
4.What should be in
the Reserve Fund Study?
The study consists of two sections:
The Physical Analysis
·This section reviews the condition
and life expectancy of the assets or components.
·Comments on the site conditions
that may affect the life expectancy
·Estimates the remaining life the
assets have left or need for major repairs
The Financial Analysis
·Estimates costs for major repairs
·An appropriate recommendation of
how much money should be put into the condo reserve fund and how to adequately fund it.
·Provides a projection of when major
repairs or replacements will be necessary.
5.What should a
Condominium Corporation provide for the study to be conducted?
·A list of all the repairs and
replacements that have been carried out and when they were done
·Summary of all the issues that have
·Accurate drawings of the buildings
·Declaration and description
·Financial statements and any
·Documentation of previous studies
if there are any
·Details of the current contribution
to the Reserve Fund
6.What are the
types of Reserve Fund Studies?
Reserve studies can be grouped into four categories:
·Full Study: This is the most
comprehensive study carried out of the property. It includes component
inventory, conditions assessment based upon on-site observation, life, and
valuation estimates of components, and a determination of the reserve funding
plan and reserve fund status.
·Update With Site Visit: As the name
implies, it is an updated study of the comprehensive study. A site visit is
necessary to carry out an updated study.
·Update With No Site Visit: A site
visit is not necessary for this kind of study to be undertaken. It involves
updating financial information based on the information provided by the
corporation or HOA board.
·Preliminary: This is a study
prepared before construction that is used for budget estimates. It is based on
the architectural and engineering plans.
A Reserve Fund Study is a
vital document that guides the Board in managing a corporation's assets and
components. It is thus essential to find a provider who will produce a