by Beth Mulcahy, Esq.
Our association board is considering hiring a company to prepare a reserve study but we aren’t really sure what a reserve study is. Can you define a reserve study for us? How much do reserve studies cost?
A reserve study is a budgeting guide that provides a comprehensive plan that shows an association how much is reasonable to place in reserve for a specific replacement or maintenance project. When properly executed, it can give a clear picture for the maintenance, repair or replacement requirements of association assets for the life of the association. A reserve study starts with an accurate inventory of the community’s assets to determine the useful life of said assets and a review of the association documents to determine the responsibilities of the association regarding property and assets.
A reserve study should provide:
- A detailed inventory of association assets that are labeled as assets for the reserve account;
- Location of the assets;
- Current age and remaining life of each asset creating a time line for scheduled repair, maintenance or replacement;
- The cost to replace each asset when necessary;
- The costs of repair or maintenance, ie. painting association fences; and
- A calculation of the monthly contribution required to have proper funding for repair, maintenance or replacement when needed.
Arizona law currently does not require an association to obtain a reserve study. However, it is in the best interest of an association to hire a qualified and licensed company to assist an association with a reserve study. Reserve studies cost in the range of $800 to $5,000 depending on the amount of amenities in your Association.
For more information on this topic, view our Cheat Sheet “Reserve Fund 411” by clicking on this link: http://mulcahylawfirm.com/news/Reserve%20Fund%20411.pdf
Please email Beth Mulcahy, Esq. for a free copy of a sample reserve study and for names and contact information for reserve study specialists.