INFORMATIONAL PURPOSES ONLY: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; this Firm does not recommend or endorse the contents of the third-party sites.
It never fails. A HOA has major goals for the year, but how much money will they spend? How can the HOA even achieve those goals? Who is going to build the thing they want, or will the Board of Directors raise assessments? What if the HOA doesn’t even have goals? How do they figure that out?
A reserve study is a mechanism to determine what the association’s goals might be and how the association may pay to accomplish those goals. The association must create a budget every year to determine the needs of the association and a reserve study can help the association finalize the total numbers of the budget.
A reserve study may also be the only way to determine when vital components of the association need to be replaced. Replacement and maintenance could be the most important part of the association’s duties. A condominium association that has increased responsibilities in the infrastructure of the building or buildings will likely be doing reserve studies regularly. If maintenance is not regularly done, the condominium association can see catastrophic outcomes (even fatal) as seen in Florida after a condominium building collapsed.
Reserve studies do not cost a significant amount of money (depending on the common areas and whether the association is a condominium or residential subdivision). In Texas, there is no requirement for annual or regular reserve studies. Some states have requirements that HOAs perform reserve studies every three or five years. Some statutes dealing explicitly with condominium associations discuss reserve studies but no statute specifically requires it be done. This may change after the building collapse in Florida. Regardless of future requirements, reserve studies do help the association have a broad overview of what needs to be done, how much it will cost, and how much the association already has in their operating account or reserve accounts.