Real Estate Branch

Every condominium is different and has different expenses and reserve requirements. Therefore, no specific dollar amount can be given for any condominium. Instead, a board must make a reserve study (or analysis) of the project to determine if the association has sufficient reserves. A reserve study requires the board to determine: (i) which parts of the project the association is responsible for (e.g. walls, roof, parking lot); (ii) when they will need replacement, maintenance, or repair; and (iii) how much that will cost.

Example: A board’s reserve study indicates that in 10 years the project roof will have to be completely replaced at a cost of $100,000. At present, the association has no money to do the work. The board must collect at least $10,000 a year for the next ten years ($100,000 divided by 10) to ensure that it has a “full” reserve for the roof (i.e. $100,000 to replace the roof 10 years in the future). NOTE: The board does not have to collect $100,000 immediately. The board needs to collect only enough to ensure the association has the necessary amount at the end of ten years. For example, if after 5 years the board has collected $50,000, its roof reserve should be “full” at that point. The roof will still be 5 years from replacement, so the association will still have 5 years to collect the necessary funds. In 1992, the reserves law was amended to permit an association to set aside a “statutory reserve” of at least 50 percent of a full reserve.

Private companies that conduct reserve analyses for condominium associations may be hired to assist associations with their reserve study.