Planning For A Rainy Day

To date there are only eight states that require replacement reserve studies, by law, for homeowners associations, condominiums, and cooperatives. The only one in the Mid-Atlantic region that does so is Virginia, which mandates studies every five years. Maryland requires budgeting of reserves but there is no current statute or regulation stating ”perform a reserve study.”

Legal requirements notwithstanding, reserve studies are essential to responsible financial planning and a reserve study can only be accomplished by physical inspection of the common elements of a community. You can buy reserve study software wherein you fill in some blanks and it disgorges an annual contribution, but it would be imprudent to assume all systems are “typical”.  The five-year period cited in the Virginia statute should be adequate for most communities. Three to four years would be better, particularly for older and/or more complex associations.