The terms you meet in a reserve study, each defined in one sentence and then explained in plain language. Written for board members, managers and anyone new to reserve planning.
A reserve study is a long-range budget planning document that lists the major shared components an association must repair or replace, estimates when and what each will cost, and sets out how to fund that work.
Read morePercent funded is the ratio of an association's actual reserve balance to its fully funded balance at a point in time, shown as a percentage.
Read moreThe fully funded balance is the reserve balance that matches the worn-out share of every component: for each one, its current replacement cost multiplied by the fraction of its useful life already used.
Read moreA reserve component is an individual item of shared property that the association must maintain, repair or replace, and that is included in the reserve study.
Read moreUseful life is the total number of years a reserve component is expected to serve its purpose when it is installed and maintained properly.
Read moreRemaining useful life is the estimated number of years a reserve component can keep serving its purpose before it needs major repair or replacement.
Read moreEffective age is the difference between a component's useful life and its remaining useful life.
Read moreReserve study levels are the service types defined in the National Reserve Study Standards: Level I is a full study, Level II is an update with a site visit, and Level III is an update without a site visit.
Read moreA reserve study update is a revision of an existing reserve study that refreshes component conditions, costs, the reserve balance and the funding plan without rebuilding the inventory from scratch.
Read moreA funding plan is an association's plan for providing income to its reserve fund to cover the expected reserve expenses, normally projected over at least 30 years.
Read moreFull funding is a reserve funding goal that aims to bring the reserve balance to, and keep it at or near, 100% funded.
Read moreThreshold funding is a reserve funding goal that keeps the reserve balance above a chosen minimum, set as a dollar amount or a percent funded level.
Read moreBaseline funding is a reserve funding goal that keeps the reserve cash balance above zero throughout the projection, and no higher than it needs to be.
Read moreA special assessment is a charge levied on owners in addition to regular assessments, usually to pay for a project or shortfall that the reserve fund cannot cover.
Read moreDefinitions follow the National Reserve Study Standards published by Community Associations Institute (CAI), explained in our own words. State law can define a term differently for its own purposes.
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