Reserve Study

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.

A reserve study has two parts. The physical analysis is the component inventory: what the association owns, its condition, how long each item should last and what it costs to replace. The financial analysis looks at the reserve fund: the current balance, the income going in, and a funding plan that covers the expected work, usually over 30 years.

Boards use the study to set the reserve line in the annual budget and to explain that number to owners. Lenders, buyers and insurers read it to judge how well a community is looking after its buildings. Many states require associations to carry out a study on a set schedule, and several require the results to be disclosed to owners.

A study is not a one-time document. Costs change, components wear faster or slower than expected, and the balance moves every month. That is why studies are updated regularly, with or without a new site visit.

A reserve study is prepared by a qualified professional. It is a planning tool, and it does not replace an engineering or structural inspection.

Source: this definition follows the National Reserve Study Standards, published by Community Associations Institute (CAI), explained in our own words. State law can define the term differently for its own purposes.