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Why does an Association need a Reserve Study
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Why does an Association need a
Reserve Study? |
The Association must perform
a Reserve Study by law every third year. The board must review the Reserve
Study annually. In California there is currently no requirement to fund the
reserves only the need to disclose the financial standing of the reserves to
current owners, potential buyers and lenders. A Reserve Study may:
1. Reduce property deterioration.
2. Enhance property values through pride of ownership.
3. Provide a basis for implementation of a preventative maintenance program.
4. Avoid special assessments.
The Directors have a fiduciary responsible of operating the Association in a
reasonable and prudent manner. The Association may adjust replacement
reserve assessments annually to take into account any changes. The Directors
must attest to the adequacy of the reserve funds and declare if they
anticipate a reserve increase or a special assessment.
A Reserve Study is a planning tool for any association which assists the
Directors in complying with California Civil Code 1365 by providing reserve
information needed in the annual budgeting process. |
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