Updating reserve studies
A reserve study goes stale the moment it's finished. Here's what changes at each update, how often the law requires a new one, and what a board should be doing in the years between.
A reserve study is not a one-time document. Boards review the numbers every year, and a professional gets a fresh look on a cycle set by state law and the association's own governing documents, often every three to five years, because replacement costs, interest rates, and each component's remaining life keep changing.
What actually changes between updates
The list of things your association is responsible for, the roof, the pool deck, the clubhouse HVAC, does not move much from one study to the next. Reserve Advisors, a national reserve-study firm, notes that the component inventory itself:
"should be relatively stable from year to year"
Source: What's Included in a Reserve Study? Key Elements Explained, Reserve Advisors
What moves is everything measured about those things. Each update reassesses the condition of every component, recalculates how much useful life is left, and reprices replacement using current bids and cost data. A roof that had twelve years left at the last study might have nine now, or fewer, if the inspection turned up problems nobody saw before.
How often a new study is required
Whether you need a new study, and how often, depends first on your governing documents and second on your state. Requirements vary sharply from state to state, so check your own state's condominium or common-interest-ownership statute and your CC&Rs before assuming a national rule applies.
Two examples show how differently states set the clock. California requires the board to obtain:
"a reasonably competent and diligent visual inspection"
Source: California Civil Code Section 5550, California Legislature
at least once every three years, once the replacement value of the association's major components reaches half its annual budget. Nevada sets a longer cycle: a professional reserve study at least once every five years, with the executive board reviewing the results every year in between and reporting a summary to the state's Real Estate Division.
The annual review between updates
A full update is not the only checkpoint. In both California and Nevada, the board must review the study's findings at least once a year and adjust course if something has changed, even in a year with no new inspection. That habit matters beyond compliance. Legal commentary on board fiduciary duty ties liability protection to whether the board was:
"disinterested, reasonably informed under the circumstances, and able to reasonably believe that the decision was in the best interests of the association"
Source: Fiduciary Duties 101, Limiting the Liability of the Board, communityassociations.law
A board that reviews its study every year and writes down why it did or didn't change contributions is in a materially different position than a board that filed the study away and never looked at it again.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Your reserve study preparer returns for a third straight year. The component list hasn't changed, but two numbers on the report have. Which two most likely changed?
An association in Nevada asks how often state law requires a professional reserve study. Based on NRS 116.31152, what's the answer?
A board skips its annual reserve-study review for three years straight, then faces a large unexpected assessment. Which duty does this most directly touch?
Sources
- What's Included in a Reserve Study? Key Elements Explained, Reserve Advisors
- California Civil Code Section 5550, California Legislature
- Nevada Revised Statutes Section 116.31152, Nevada Legislature
- Fiduciary Duties 101, Limiting the Liability of the Board, communityassociations.law
Related elsewhere in the Academy
Reserves
Not sure what your own state or bylaws require between updates? See Statutory reserve requirements next.
How often a reserve study must be updated, what triggers a new one, and what (if anything) must be reported to the state all vary by jurisdiction and by your association's own governing documents.