Why is a Reserve Study Important?
A reserve study is an essential tool for any homeowner’s association (HOA) because it helps the
board members plan and ensure the long-term financial stability of the community. Here are some reasons why a reserve study is important for an HOA:
Budgeting: A reserve study provides a detailed analysis of the community's physical assets and their expected lifespan, allowing the HOA to plan for necessary repairs and replacements. This information helps the HOA budget effectively and avoids unexpected expenses.
Preventative maintenance: With a reserve study in hand, the HOA can develop a preventative maintenance plan to extend the lifespan of assets, reduce repair costs, and keep the community in top condition.
Credibility: A reserve study can enhance the credibility of the HOA with potential homebuyers and lenders. It shows that the HOA is financially responsible and is taking steps to ensure the community's long-term viability.
Prioritization: A reserve study can help the HOA prioritize projects and allocate funds appropriately. It can also help the board make informed decisions about whether to repair or replace assets, based on their remaining lifespan and repair costs.
Compliance: In Utah. (Code 57-8a-21 Requires that all community associations must have a full reserve study performed every six years, with an update every three years.) A reserve study is required by law for HOAs with a reserve property or facility. Ensuring compliance with these laws is essential to avoiding legal and financial issues down the road.
A reserve study is a crucial tool for any HOA board because it helps the community plan for the future, maintain physical assets, and ensure financial stability.