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A reserve study report is a budget planning tool (typically a 30 year plan) for community associations or special use properties.  Reserve studies are used to help communities prepare financial plans regarding common depreciable assets that last more than one year and have a repeating life cycle. 

A reserve study identifies a community association's common elements such as; roof, paint, fences, paving, signage, exterior & path lighting, other structures and shared features (excluding daily maintenance) assesses their current condition, remaining useful life and cost of repair or replacement. 

Essentially, a reserve study is a road map for the communal body to prepare for high-dollar expenses pertaining to the repair or replacement of capital items maintained over the life of the community to ensure property value retention and growth, community property safety, curb appeal, and municipal code compliance. It serves as a model for how much annual funding should be set aside each year, over 30 years, in a fair and consistent manner with the end goal being a fully-funded reserve account, and avoidance of costly special assessments. 

Every community has to submit a reserve schedule to the State of Florida that list their reserve assets. Reserve studies only include components for which the condo association or HOA has maintenance responsibility. The condominium, townhome, or homeowners’ association’s governing documents will provide guidance on this determination. Florida Statutes governing condominium and homeowners’ associations have specific requirements for each type of community association. 

Condominium Association Reserve Study Requirements - Florida Statute 718.112(f) [2] requires condominium associations to fund a reserve account for certain capital expenditures and deferred maintenance. The statute requires all condominium associations to maintain reserves for roof replacement, building painting, pavement resurfacing and any other expenditure which is expected to exceed $10,000.

The statute doesn't state that a reserve study be conducted to determine the level of funding required. However, the statute does require that the reserve contribution be computed using a formula which is based upon the estimated remaining useful life and the estimated replacement cost or deferred maintenance expenditure for the component. Florida Statute 718.112(f) [3] regulates the use of money collected for reserves, limiting the use of such funds to authorized reserve fund expenditures. A vote is required if reserve funds are used in operations.

Inspection by a licensed architect or engineer is required for condominium associations containing buildings over 3 stories once every 5 years. The architect or engineer must issue a report, under seal, attesting to the required maintenance, useful life, and replacement costs of the common elements. An association may wave the inspection requirement by majority vote. Any such waiver must occur before the end of the 5-year period and is only good for the 5-year period in question.

Homeowners' Association Reserve Study Requirements - Florida Statues are much simpler for an HOA. First, reserve funds are not required unless the homeowners' association's governing documents call for the study. The law does not prohibit including reserves in the proposed budget for the homeowners’ association. Likewise, the proposed operating budget need not follow any specific statutory formula, but should include the anticipated expenditures for the year.

If you're the board member of a Condo or Homeowner's association, you may need a reserve study.  If you are a community member, or member who owns real estate within a community, you should have access to the reserve study to know what your financial responsibility will be for your personal financial planning and to ensure your board is effectively collecting dues and maintaining the reserve so you can avoid special assessments. 

There are many reasons a community association or special use property may need a reserve study, they:

• Are required by Florida law every three years for any condo association;
• Help associations prepare realistic budgets for major communal expenditures;
• Ensure proper funding is available to make repairs and replacements, which maintain a positive image of your community and facilitates property value growth instead of decline;
• Keep your association running smoothly and outline a path forward;
• Help eliminate or minimize special assessments;
• Are unique tools designed to provide unbiased and objective figures for community board of directors, homeowners, and property managers to consider in a transparent way.

We have completed hundreds of reserve studies in the State of Florida, maintain awareness of legal and market changes, have experts on hand to meet the needs of our clients.