We are now halfway through 2024 and we want to again remind our community association clients to check their reserve study status to ensure compliance with the January 8, 2024 law relating to reserve studies and reserve funding.

Who must comply?

All community associations are required to comply with the new reserve law. The only exception is a community association with common elements/common property that will cost less than $25,000 to replace.

What is required for compliance?

Reserve studies must now be updated at least once every 5 years. While it may be prudent to update the reserve study more frequently, the law only requires an update every 5 years.

When does our association need an updated reserve study?

• Reserve study dated January 8, 2019 or earlier. If your last reserve study is dated January 8, 2019 or earlier, it must be updated by January 8, 2025. If your association does not have a reserve study, it must obtain one by January 8, 2025. Thereafter, the reserve study must be updated at least once every 5 years.
• Reserve study dated after January 8, 2019. If your last reserve study is dated after January 8, 2019, the law requires it be updated at least once every 5 years.
• Community associations formed after January 8, 2024. If your community association was formed after January 8, 2024, you must undertake a reserve study as soon as practicable but not more than two years following the election of a majority of the board (homeowner control). Even if the developer provided a reserve study, there may be good due diligence reasons to update it as soon as possible after homeowner control.

We need an updated reserve study. What should we do?

If your reserve study must be updated in 2024 or 2025, you should contact the association’s engineer now and get on the schedule. If your reserve study must be updated after 2025, calendar the due date and work with the association’s engineer well in advance to determine scheduling.

What budgetary impacts should we expect from the new reserve law?

Anticipate budget increases. Preventive maintenance (previously called “deferred maintenance”) must be included in the reserve study as well as the cost of the reserve study and structural inspections (if applicable). Also, associations must have adequate reserve funding. Adequate funding means that when a certain improvement is ready for replacement the funds will be available without the need for a special assessment or bank loan. The law permits you time to catch up, but you must catch up. If adequate funding requires an increase of more than 10% of the previous year’s assessment, the deficiency shall be made adequate within the following ten years. If adequate funding requires an increase of less than 10% of the previous year’s assessment, the deficiency shall be made adequate within the following two years.