Board members must understand the HOA reserve study requirements imposed on them by state laws and the governing documents. A reserve study is a valuable financial tool that gives the board clear guidance on future costs. This study helps the board ensure sufficient contributions and avoid underfunded reserves, delayed repairs, and large special assessments.
Are HOA Reserve Studies Required?
Reserve studies may be required depending on state law and the association’s governing documents.
Some states impose specific study requirements. For example, Virginia requires HOAs to conduct a reserve study at least once every five years (Section 55.1-1826). The board must review the study results at least annually to determine whether reserves remain sufficient.
Maryland also generally requires reserve studies for HOAs (Section 11B-112.3), with updates at least every five years. Condominiums in the state have similar requirements (Section 11-109.4).
If state laws are silent, the board can’t automatically skip the study. Many associations’ governing documents also require a reserve study to ensure proper funding. That said, even without this requirement, it is still best practice to enact and follow reserve study guidelines for homeowner association budgets.
What are HOA Reserve Fund Requirements?
As with the reserve study, state laws and the association’s governing documents determine whether reserve funding is required for an HOA or condominium.
For example, in Ohio, condo associations must budget for reserves (Section 5311.081). The law requires the budget to include enough reserves for major repairs and replacements without special assessments.
Florida has a similar requirement. Condominium associations must include reserves in the annual budget, and associations subject to structural integrity reserve study requirements face additional restrictions (Section 718.112).
Even when reserve funding isn’t legally required, an association should set aside money for capital replacements and repairs. An HOA reserve fund ensures the association has enough money to cover long-term maintenance and repairs, with contributions divided into installments to make payments more manageable.
HOA Reserve Funding vs HOA Reserve Study Requirements
Reserve funding requirements and reserve study requirements are not the same thing. The former tells the board whether it must maintain and fund reserves, while the latter tells the board whether it must conduct a reserve study.
Reserve funding deals with the money itself. It determines whether the association must contribute money to reserves. Meanwhile, a reserve study lets the board evaluate long-term repair and replacement needs. This study generally identifies the HOA’s major components, estimates their remaining useful life, and calculates how much the association needs to set aside each year to cover repairs or replacements when the time comes.
Some states require one but not the other, while others require both.
Understanding HOA Reserve Study Requirements
Reserve study requirements can differ in frequency, content, professional qualifications, and consequences of noncompliance. Board members must understand state laws and the stipulations in their governing documents, since no general answer fits every community.
How Often Should an HOA Conduct a Reserve Study?
The right frequency for a reserve study depends on state laws and the governing documents, but it is best to update it regularly to keep the information current.
In Virginia, for instance, HOAs must perform a reserve study at least once every five years (Section 55.1-1826). The board must also review the study results annually to determine whether it has sufficient reserves.
In Washington, associations must update the reserve study every year (RCW 64.90.545). Moreover, at least every third year, a reserve study professional must prepare the update, which should include a visual site inspection.
Meanwhile, in Florida, condominiums must conduct a structural integrity reserve study at least every 10 years after formation (Section 718.112).
If state laws are silent, board members should refer to their CC&Rs and bylaws.
What Should an HOA Reserve Study Include?
In general, a reserve study includes a list of all major components, estimates of their remaining useful lives and replacement costs, and a calculation of the funding the association needs to meet long-term financial obligations.
Some states go into much more detail than others. For example, in Washington, studies must include a list of reserve components, quantities, useful life estimates, remaining useful lives, current replacement costs, reserve balances, funding information, and other specified financial projections (RCW 64.90.550).
In Maryland, a condo reserve study must identify certain structural, mechanical, electrical, plumbing, and other common-element components, along with other details (Section 11-109.4).
Who Should Conduct an HOA Reserve Study?
Generally, a professional should perform an HOA reserve study, but some states have strict qualifications.
Maryland, for instance, has specific rules about who can prepare a reserve study (Section 11-109.4). The preparer must meet at least one qualification, such as being an engineer or having sufficient experience preparing these studies. They may also hold a Reserve Specialist or Professional Reserve Analyst designation.
Washington and Florida have similar laws that require a qualified professional to prepare the initial study and every subsequent update.
Board members should avoid conducting the study themselves, especially if they don’t possess the right credentials or experience. Instead, they should hire reserve specialists, engineers, architects, or HOA management companies.
What are the Consequences of Failing to Comply with HOA Reserve Study Requirements?
Depending on the state and the type of violation, consequences can include enforcement actions, legal expenses, and fiduciary duty concerns.
Florida has specific statutes for condominiums. A board member who knowingly fails to complete a structural integrity reserve study when it’s required is considered in breach of their fiduciary responsibility to the unit owners (Section 718.112).
Washington law, by contrast, provides a more direct enforcement mechanism. If more than three years have passed since a professional has prepared the last study, 20% of owners can demand one (RCW 64.90.555). Owners may bring an enforcement action, and a court may order the HOA to conduct the reserve study and even award reasonable attorneys’ fees.
Still, even without a legal consequence, associations should comply with HOA reserve study requirements. Failure to do so can create financial problems for the association, such as underestimating reserve funding needs and being forced to levy large special assessments to meet a healthy reserve level.
HOA Reserve Study Requirements by State
Not all states require associations to obtain a reserve study. Here are the HOA reserve study laws by state, but keep in mind that these don’t address whether reserve funding is required.
| State | Reserve Study Required? | Frequency / Key Conditions |
|---|---|---|
| Alabama | Not generally required | No statewide study cycle |
| Alaska | Not generally required | No recurring statewide study mandate |
| Arizona | Not generally required | No recurring statewide study mandate |
| Arkansas | Not generally required | No statewide study cycle |
| California | Yes, for covered associations | Every 3 years; annual review |
| Colorado | Conditional | Declarant study required before turnover; no recurring cycle |
| Connecticut | Not generally required | No statewide study cycle |
| Delaware | Conditional | Qualifying studies generally no more than 5 years old |
| Florida | Yes, for qualifying condos | SIRS generally every 10 years; not a general HOA mandate |
| Georgia | Not generally required | No statewide study cycle |
| Hawaii | Yes, for covered condos | Annual review; periodic independent review |
| Idaho | Not generally required | No statewide study cycle |
| Illinois | Not generally required | Condo boards consider any professional study obtained |
| Indiana | Not generally required | No general study cycle |
| Iowa | Not generally required | No statewide study cycle |
| Kansas | Not generally required | No statewide study cycle |
| Kentucky | Not generally required | No general study cycle |
| Louisiana | Not generally required | No statewide study cycle |
| Maine | Not generally required | No statewide study cycle |
| Maryland | Yes, for covered associations | At least every 5 years |
| Massachusetts | Not generally required | Condo reserve funding required; no study cycle |
| Michigan | Not generally required | Condo reserve funding rules; no general study cycle |
| Minnesota | Reserve evaluation required | At least every 3 years |
| Mississippi | Not generally required | No statewide study cycle |
| Missouri | Not generally required | No statewide study cycle |
| Montana | Not generally required | No statewide study cycle |
| Nebraska | Not generally required | No statewide study cycle |
| Nevada | Yes, for covered associations | Every 5 years; annual funding review |
| New Hampshire | Not generally required | No statewide study cycle |
| New Jersey | Yes, for covered associations | Every 5 years; small-asset exemption |
| New Mexico | Not generally required | No statewide study cycle |
| New York | Not generally required | No general statewide study cycle |
| North Carolina | Not generally required | No statewide study cycle |
| North Dakota | Not generally required | No statewide study cycle |
| Ohio | Not generally required | Reserve funding obligations; no mandatory study cycle |
| Oklahoma | Not generally required | No statewide study cycle |
| Oregon | Yes, for covered associations | Annual study or review/update |
| Pennsylvania | Not generally required | No statewide study cycle |
| Rhode Island | Not generally required | No statewide study cycle |
| South Carolina | Not generally required | No statewide study cycle |
| South Dakota | Not generally required | No statewide study cycle |
| Tennessee | Yes, for covered condos | Every 5 years; annual funding review |
| Texas | Not generally required | No statewide study cycle |
| Utah | Yes, for covered associations | Every 6 years; review/update every 3 years |
| Vermont | Not generally required | No statewide study cycle |
| Virginia | Yes, for covered associations | Every 5 years; annual review |
| Washington | Yes, for covered associations | Annual updates; professional site inspection every 3 years |
| West Virginia | Not generally required | No statewide study cycle |
| Wisconsin | Not generally required | Condo reserve rules; no general recurring study cycle |
| Wyoming | Not generally required | No statewide study cycle |
Compliance and Assistance
Boards must understand the different HOA reserve study requirements that apply to their association. State laws play an integral role, but so do their governing documents. When in doubt, consult a legal professional or an HOA management company.
Clark Simson Miller offers HOA financial management services to community associations. Call us today at 865.315.7505 or contact us online to request a proposal!
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