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Reserve studies give community association managers, board members and property owners assurance that future major property expenses are identified early and that a funding plan is in place to pay for those expenses.
Here are four important reasons to conduct a reserve study.
To comply with State Law:
Chapter 64.34 RCW Article 3, Section 2 requires a residential condominium association in the state of Washington to prepare an initial reserve study based upon a visual site inspection conducted by a reserve study professional; update the study annually; and arrange for a visual site inspection every three years by a reserve study professional. An amendment to the law in 2012 requires Homeowner Associations in WA to get Reserve Studies as well (see House Bill 1309). Click below for a link to Senate Bill 6205 (WA Reserve Study Law) and WA House Bill 1309 (amendments to Reserve Study Law).
To maintain the property’s value and appearance:
A reserve study helps maintain the property’s value and the property owner’s investment. By identifying and budgeting for future capital improvements, the property’s common elements continue to look attractive and well-kept, adding to the community’s overall quality of life.
To fulfill the board of directors’ fiduciary responsibility:
Board members of community associations have a fiduciary responsibility to their members. Directors are legally bound to use sound business judgment in guiding the association and cannot ignore major capital expenditures or eliminate them from the budget.
To establish sound financial planning and budget direction:
A comprehensive reserve study lays out a schedule of major repairs or replacements to common property elements and applies cost estimates to them. To ensure property owners have adequate reserve funding to cover anticipated costs, a reserve funding plan spans 30 years. In short, it’s your blueprint for the future.
