Reserves

Reserve funding, reserve studies and property infrastructure go hand-in-hand.

What belongs in a reserve study?

Your state statutes may have something to say about this, but there are also many references below that should prove useful. In Washington State, three of our CIC statutes dictate reserve studies must include:

A reserve component list, including any reserve component, the replacement cost of which exceeds one percent (1%) of the annual budget of the association, excluding contributions to the reserves for that reserve component. If one of these reserve components is not included in the reserve study, the study should explain the basis for its exclusion...

How reserve funds can be expended?

It sounds like a broken record, but look to your state statues. In Washington State, three CIC statutes allow the Board to:

...withdraw funds from the association's reserve account to pay for unforeseen or unbudgeted costs that are unrelated to replacement costs of the reserve components. Any such withdrawal must be recorded in the minute books of the association. The board must give notice of any such withdrawal to each unit owner and adopt a repayment schedule not to exceed twenty-four months unless the board determines that repayment within twenty-four months would impose an unreasonable burden on the unit owners...

The board may withdraw funds from the reserve account without satisfying the notification of repayment requirements under this section to pay for replacement costs of reserve components not included in the reserve study.

Why would an association withdraw reserve funds to pay for items that are not contemplated in the reserve study?

  • to pay for capital improvements that will be depreciated over a period of several years to amortize the entire expense and lessen the burden to current owners

  • to fill a gap in operating funds (!)

  • to pay for a component that will be added to the reserve study

Reserve Study Lessons Learned (RSWG) - 2021

Predicting the future isn't easy, but this industry-standard reserve calculator with does most of the hard work for you!

CRITICAL QUESTIONS FOR EVERY RESERVE STUDY:

  1. Are all the correct components identified and included? This requires understanding what your annual operating budget will resolve.

  2. Are components with useful lives of 40 to 50+ years correctly calculated as part of the fully funded balance?

  3. Are components properly categorized as CE vs. RLCE vs. CLCE, etc. as required by your governing documents?

  4. Does every component reflect the correct useful life and remaining useful life?

  5. Does every component reflect an accurate cost to maintain, repair or replace?

  6. Are assumptions about component inflation costs and annual interest realistic?

N.B. This reserve calculator is not a replacement for hiring a reserve study vendor. | File > Save As > Download a Copy | Requires Excel 2016+

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Condominium Reserve Calculator
RSWG Detailed Reserve Study Questionnaire (Responses)