As an HOA board member you probably know what a reserve study is and the importance of doing one. If you don’t, take a couple of minutes to read this blog to familiarize yourself with frequently asked questions about doing a reserve study in your homeowners association.
It’s important to know that the law actually requires an Association to update its reserve study every year. Equally important is that having the proper reserves in place will ensure that the long term assets in the Association (roads, roofs, pool, landscape, etc.) will be properly cared for and maintained.
Certain expensive common elements must be replaced every 10, 15, or 20 years. Part of preparing the budget includes calculating how much money the Association must set aside each year so that the needed funds are available when large projects are due to start. An HOA board should work closely with a reserve specialist to make sure that the estimated funds are as accurate as possible.
Some things you might expect from a Reserve Specialist are:
- A reserve specialist will prepare a study that will provide the board with guidance on how to keep the Association’s physical assets from deteriorating faster than the financial assets increase.
- A reserve specialist will visit the community to inspect it and prepare a written reserve study for the Association. That report will include an inventory of all common area items, recommendations on what needs to be replaced and when, what the replacements will cost, and a plan for paying for them.
- A reserve specialist chosen by the HOA board, has the expertise and experience to accurately determine the life cycles of the common components of the community and will help the board estimate the cost to repair or replace them.
- A reserve specialist is also an expert at analyzing the financial resources needed to maintain the common elements over time and will advise the board how to balance the size of the reserve fund against the deterioration of the common elements.
Since the community’s physical assets are constantly decaying, the guidance of a reserve specialist will help protect property values as well as help the HOA board protect the community’s assets by guiding them through the process, with the end goal of keeping the Association looking its best at all times.