Real Estate & Property Law

What Constitutes a Good Reserve Study? Who Should Prepare?

Here are some questions from a loyal blog follower about reserve studies:

"I have searched all over the net and can't find any information about reserve studies. How does an HOA find a qualified company, how does an association know if there reserve study is any good, etc. My nephew has a property management company and he only uses engineering companies ...."

To find these qualified individuals, there are resources. APRA is (Association of Professional Reserve Analysts) can be found at WWW.APRA-USA.COM. You can sign up there for a free E-Newsletter with news and articles about reserve studies. In California, CAI (Community Associations Institute) has 9 geographically located Chapters with directories listing vendors that provide studies (www.caionline.org is the national website to find the local chapters). If you attend expos and seminars put on by APRA, CAI and other industry groups like ECHO (Executive Council of Homeowners) at www.echo-ca.org you can talk to the vendors in person.

A good reserve study has a good component list (those components the Association is obligated to maintain) and a good funding plan that outlines the anticipated life and how the association will raise the money for anticipated repairs and replacement (using reserve funds, special assessments, loans, and otherwise). Contractors, engineers, and financial vendors such as CPAs can be very helpful. It's hard to know if a reserve study is a good one unless you are well versed in HOA finance and building maintenance. But using the right kind of professionals (people who know California law, can assess buildings as to condition, can do financial planning, and the like) for assistance is helpful.

In California, the pertinent laws are found at Civil Code Section 1365-1365.1 and you can get access on my webpage (www.californiacondoguru.com) to The Davis Stirling Act where these laws are found. You can also purchase low cost Primers on the subject of what should be set aside and why, and what investments are proper for reserves. And there is a series on Assessments too, such as how to collect assessments and how to get a large special assessment to pass when needed for repairs.

Just visit the Publications page and look for the Reserves and Assessment Primers.

Full post as published by California Condo & HOA Law on December 29, 2009 (boomark / email).