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Why your HOA needs a Reserve Study
Your common area elements and physical components, like your community pool or a HVAC system, will eventually need to be replaced or have parts of them replaced. To plan and save for those costly replacements, your association needs to conduct a reserve study. A reserve study is conducted by a firm that sends experts to evaluate the physical components of your property. The most accurate reserve studies are conducted by licensed engineers who understand the industry. The analysis will consider the current state of your reserve funds and will recommend appropriate funding levels to make sure you can cover capital expenditures for the next 30 years. Even though a reserve study plans 30 years into the future, your association needs to have it updated every few years to account for things like storm damage, capital improvements, new assets, and changes in interest rates and property values.
Without a reserve study that helps your community plan and save for anticipated repairs, your association will likely have to levy special assessments to your homeowners to pay for the things that you need. Reserve studies help maintain strong property values. By identifying and budgeting for future capital projects, these evaluations can help board members fulfill their fiduciary duty of protecting the association’s assets.
Your reserve study should also be the core of your preventative maintenance plan. Because the study details the expected life span of major items and when the association will be financially able to replace them, it’s important that you have a preventative maintenance plan in place that follows the timeline of the reserve study to get the most life out of your equipment and assets.