Re: Reserve Studies
From: Karen Carlson (
Date: Thu, 29 Dec 2011 09:17:56 -0800 (PST)
Our community invested in a reserve study within a year of move in and we have 
moved forward with the plan to build up the fund as recommended.  Building the 
fund does drive increases in HOA dues but the community has some leeway in how 
to manage the increases. I can't imagine a condo association (cohousing or not) 
not going with this plan.  (Our study did include major hard landscaping 
elements like boulder retaining walls.) Equity is a major factor.  Everyone who 
lives here is paying for their use of the assets.  If someone leaves and sells 
his/her unit, the new owner will not suddenly be socked with a huge special 
assessment for a new roof on a building they've just moved into. All residents, 
past & present,  have contributed.  The study also makes it clear that a well 
managed community will be looking careful;y at what needs fixing or replacing. 
The study is a good guide. An architect or professional developer can recommend 
companies that do such studies.

Karen Carlson 
Arboretum Cohousing Community
Madison, Wi

On Dec 29, 2011, at 11:03 AM, Douglas G. Larson wrote:

>> We have never done a Reserve Study.  As the liaison with this List, I
> have forwarded a lot of the e-conversation about it to my neighbor on our
> Long Term Planning Committee.  Would someone please > 
>> send a definition of what it is? And how it is worth the expense.  Part
> of her response is below.
> Here are the basics about Reserve Studies and Reserve Funds for Homeowner's
> Associations. 
> Reserves are funds set aside by a Homeowner's Association to be prepared for
> the eventual replacement of assets. Those assets are very broad and can be
> big ticket items like roofs, driveways or painting (both interior and
> exterior) but can also be smaller items like fences, landscaping, decks,
> common house dishwashers, ovens or refrigerators. There generally is a lower
> dollar limit below which an asset is NOT included in the reserve study.
> Hence things like toasters, coffee makers, food processors are generally not
> included. The professional Reserve Study organization can guide you on where
> that dollar limit is. 
> Reserve funds are collected regularly, usually via your regular monthly
> Homeowner's Association dues, to build up the fund for the future
> replacement of these assets.
> A Reserve Study, is a study done by professional organization that has
> experience with and knowledge of Homeowner's Associations financial standing
> as well as experience with the expected life of common capital assets, like
> those I mentioned above. They usually do a detailed initial study and then
> less detailed follow-up studies every 3 years or so. The initial study
> involves them coming to your site and looking at all assets in question. The
> follow-up studies are done to make sure that each asset appears to be about
> where you thought it was in its expected life-span as well as updating costs
> for each asset as market prices change and allowing for inflation. I am not
> sure if follow-up studies require a site visit since our community hasn't
> had its first follow-up yet. 
> Total Reserve Funds for an HOA need not be a sum of the value of all assets.
> That would be prohibitive and usually isn't necessary. Usually it's a
> percentage of the total and is designed to cover replacement expenses as
> they occur. Each asset has a different life span and the professional
> organization you hire can help you with numbers and with deciding where you
> are and where you want to be. 
> Also Reserve Funds are NOT for Capital Improvements, i.e. for building or
> purchasing assets not previously present in the community (e.g. a New
> Greenhouse, a New additional refrigerator). You would use other financial
> assessment methods to acquire those assets. Once they were acquired,
> however, they would be added to the total list of assets to be managed with
> Reserve Funds. 
> Likewise Reserve Funds are NOT for replacement of assets in the event of
> catastrophic events (e.g. Storms, Fire). Typically your insurance covers
> assets that expire under those conditions. 
> The purpose of the Reserve Study is so that you have some sound basis for 
>  a) The expected life-span of each asset
>  b) That you are collecting adequate funds to cover each asset replacement
> in the year expected.
>  C) A schedule of how much to collect each year overall and from each
> owner.
> Most state laws require Homeowner's Associations to have and collect Reserve
> Funds. I have heard shocking statistics that many Homeowner's Associations
> have inadequate funds and/or inadequate collection rates but I don't recall
> precise numbers. 
> What I can tell you is hiring a professional organization to do the Reserve
> Study is money well spent. 
> In addition to the reserve study itself, it would be beneficial to give
> serious thought to how manage the reserve funds. That is, in any given year,
> if an asset is due for replacement, the following questions are germane:
>  a)  Who (or what committee) is authorized to decide to spend the funds?
>  b)  Can the authorized person(s) spend the money without community
> approval?
>  C)  When can or should the funds be spent? Some assets will last longer
> than expected and others shorter than expected. How much time before or
> after the scheduled year, can the money be used?
> Our community is working on this Reserve Fund Spending Model now. It isn't
> complete yet but we are almost done with it. If you are interested in it,
> let me know and I can send it to you directly. 
> I hope this helps. 
> Douglas Larson,
> Songaia Cohousing,
> Bothell, Washington
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