A reserve study is a budget planning tool in which engineering and accounting professionals come and evaluate properties to determine what major maintenance needs to be done and how long the HOA has until it needs to be done. Based on the timeline given by the professional, the HOA can create a budget that includes those projects and can charge the appropriate fees based on how much a project will cost and time until the funds are needed.
The reserve study is a two step process, first by completing a physical inspection, and secondly by working with an accountant and the engineer. There are fees associated with hiring a third party to conduct a reserve study. It helps an HOA’s budget if subsequent studies can rely on data gathered in a previous study.
It is important to do a reserve study regularly so the HOA can plan their budget accordingly. No one likes to receive an unexpected bill (special assessment) and that includes the owners in your association. While you do not have to have an onsite evaluation every year, it is recommended to go over the numbers and make sure it is up to date every year. By planning far in advance, the HOA fees can be properly maintained and might only increase slightly.
The nice thing about filing an insurance claim and having certain building components replaced is that you can take those funds earmarked for future replacement and use those as needed for other repairs or maintenance. An HOA attorney or professional Community Management company can further direct you on the legalities as the law is ever changing.