Many states have enacted legislation dealing with community association reserve and operating funds to protect owners from fiscal problems and financial hardship. More states may enact similar legislation as community associations continue to gain popularity. The most important point we like to make is that completing a reserve study just to comply with State Law is of little value to a community, as even in States that have enacted laws there is little in the way of enforcing them. The best and most advantageous use of a reserve study comes from the point of fairness and full disclosure to the community members. The reserve study is completed to first determine project expenses but also to distribute the costs as fairly as possible amongst all the community members over time so everyone pays their fair share in to the reserve account.
Even though most States have not enacted laws specifically requiring reserve studies many have enacted disclosure requirements to the community members and/or buyers of homes within the community; these disclosures can typically only be addressed adequately after a reserve study has been performed. Additionally most governing documents within common interest communities indicate that a reserve account has to be established and adequate reserves maintained. Often Boards are seeking a way to get around reserve requirements and are totally unaware that it is not State Law that they need to be concerned with but their own governing documents. Ignoring governing documents can increase the exposure of Board members to lawsuits.
Please remember that community associations are governed by state law, which can vary widely from state to state. This information is intended for general educational and informational purposes only; it may not reflect the most recent developments, and it may contain errors or omissions. The publisher does not warrant or guarantee that the information contained here complies with applicable law of any given state. It is not intended to be a substitute for advice from a lawyer, community manager, accountant, insurance agent, lender, or any other professional.
Choose the State tab below for more information. States with a icon have enacted laws that require reserve studies to be completed.
Alaska
Arizona
California
Colorado
Hawaii
Idaho
Nevada
New Mexico
Oregon
Utah
Washington
Alaska
Alaska Reserve Study Laws
There is no statutory requirement to conduct a reserve study and no statutory requirement to fund reserves in the State of Alaska.
The unit owners’ associations may adopt and amend budgets for revenues, expenditures, and reserves and impose and collect assessments for common expenses from unit owners. Section 34.08.320(2). A public offering statement must include assumptions concerning the calculation of the amount of reserves certified by a certified architect or engineer; the amount included in the budget as a reserve for repairs and replacement including the estimated cost of repair or replacement cost and the estimated useful life of the asset to be repaired or replaced; and a statement of any other reserves. Section 34.08.530(5).
For condominiums, unit owners’ associations may adopt and amend budgets for revenues, expenditures, and reserves and impose and collect assessments for common expenses from unit owners. Section 33‐1242(2). The resale disclosure statement must include the total amount of money held by the association as reserves. The purchaser must also receive a copy of the most recent reserve study of the association, if any. Section 33‐1260.
For planned communities, resale disclosure statement must include the total amount of money held by the association as reserves. The purchaser must also receive a copy of the most recent reserve study of the community, if any. Section 33‐1806.
Section 10‐3830 requires directors of nonprofit corporations to discharged duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner the director reasonably believes to be in the best interests of the corporation.
Arizona
Arizona Reserve Study Laws
The State of Arizona has adopted specific statutes related to reserve studies, which are set forth in section 33.1255 of the Arizona Condominium Act.
The Arizona Condominium Act (A.R.S. 33-1201, et. seq.) generally state the distribution policy of annual assessments for common expenses. Common expenses are defined as including any allocations to reserves. There is no provision in the Condominium Act that requires that a reserve study to be prepared by the association, and contains no requirements as to how the reserves are to be calculated. Arizona has no statutory provisions requiring a planned community association to prepare a reserve study or to fund reserves. Arizona does have a statutory requirement for both condominiums and planned communities that requires certain disclosures upon the resale of a unit /lot within an association. Specifically, the purchaser must receive a statement regarding the total amount of money held by the association as reserves. The purchaser must also be given a copy of the most recent reserve study of the association, if one exists.
The Arizona Condominium Act (A.R.S. 33-1201 through 33-1270) generally states the distribution policy of annual assessments for common expenses. Common expenses are defined as including any allocations to reserves (A.R.S. 33-1255-c-1). There is no provision in the Condominium Act that requires that a reserve study to be prepared by the association, and contains no requirements as to how the reserves are to be calculated.
Arizona has no statutory provisions requiring a planned community association to prepare a reserve study or to fund reserves.
Arizona does have a statutory requirement for both condominiums and planned communities that requires certain disclosures upon the resale of a unit /lot within an association (A.R.S. 33-1260). Specifically, the purchaser must be provided with a statement regarding the total amount of money held by the association as reserves. The purchaser must also be provided with a copy of the most recent reserve study of the association, if one exists.
The full text of The Arizona Condominium Act is available on the Arizona State Web Site. The Condominium Act is included as Chapter 9, Sections 33-1201 through 33-1270.
33-1242. Powers of unit owners' association; notice to unit owner of violation
A. Subject to the provisions of the declaration, the association may:
1. Adopt and amend bylaws and rules.
2. Adopt and amend budgets for revenues, expenditures and reserves and collect assessments for common expenses from unit owners.
33-1255. Assessments for common expenses; applicability
A. Until the association makes a common expense assessment, the declarant shall pay all common expenses. After any assessment has been made by the association, assessments shall be made at least annually, based on a budget adopted at least annually by the association.
B. Except for assessments under subsections C, D, E and F of this section, all common expenses shall be assessed against all the units in accordance with the allocations set forth in the declaration pursuant to section 33-1217, subsection A. Any past due common expense assessment or installment bears interest at the rate established by the board subject to the condominium documents.
C. Unless otherwise provided for in the declaration all of the following apply:
1. Any common expense associated with the maintenance, repair or replacement of a limited common element shall be equally assessed against the units to which the limited common element is assigned.
Disclosures required for condominium developments are:
33-1260. Resale of units; information required; fees; civil penalty; applicability; definition
A. For condominiums with fewer than fifty units, a unit owner shall mail or deliver to a purchaser or a purchaser's authorized agent within ten days after receipt of a written notice of a pending sale of the unit, and for condominiums with fifty or more units, the association shall mail or deliver to a purchaser or a purchaser's authorized agent within ten days after receipt of a written notice of a pending sale that contains the name and address of the purchaser all of the following in either paper or electronic format:
1. A copy of the bylaws and the rules of the association.
2. A copy of the declaration.
3. A dated statement containing:
(a) The telephone number and address of a principal contact for the association, which may be an association manager, an association management company, an officer of the association or any other person designated by the board of directors.
(b) The amount of the common expense assessment for the unit and any unpaid common expense assessment, special assessment or other assessment, fee or charge currently due and payable from the selling unit owner. If the request is made by a lienholder, escrow agent, unit owner or person designated by a unit owner pursuant to section 33-1256, failure to provide the information pursuant to this subdivision within the time provided for in this subsection shall extinguish any lien for any unpaid assessment then due against that unit.
(c) A statement as to whether a portion of the unit is covered by insurance maintained by the association.
(d) The total amount of money held by the association as reserves.
(e) If the statement is being furnished by the association, a statement as to whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. The association is not obligated to provide information regarding alterations or improvements that occurred more than six years before the proposed sale. Nothing in this subdivision relieves the seller of a unit from the obligation to disclose alterations or improvements to the unit that violate the declaration, nor precludes the association from taking action against the purchaser of a unit for violations that are apparent at the time of purchase and that are not reflected in the association's records.
(f) If the statement is being furnished by the unit owner, a statement as to whether the unit owner has any knowledge of any alterations or improvements to the unit that violate the declaration.
(g) A statement of case names and case numbers for pending litigation with respect to the unit filed by the association against the unit owner or filed by the unit owner against the association. The unit owner or the association shall not be required to disclose information concerning the pending litigation that would violate any applicable rule of attorney-client privilege under Arizona law.
(h) A statement that provides "I hereby acknowledge that the declaration, bylaws and rules of the association constitute a contract between the association and me (the purchaser). By signing this statement, I acknowledge that I have read and understand the association's contract with me (the purchaser). I also understand that as a matter of Arizona law, if I fail to pay my association assessments, the association may foreclose on my property." The statement shall also include a signature line for the purchaser and shall be returned to the association within fourteen calendar days.
4. A copy of the current operating budget of the association.
5. A copy of the most recent annual financial report of the association. If the report is more than ten pages, the association may provide a summary of the report in lieu of the entire report.
6. A copy of the most recent reserve study of the association, if any.
Disclosures required for planned developments are:
33-1806. Resale of units; information required; fees; civil penalty; definition
A. For planned communities with fewer than fifty units, a member shall mail or deliver to a purchaser or a purchaser's authorized agent within ten days after receipt of a written notice of a pending sale of the unit, and for planned communities with fifty or more units, the association shall mail or deliver to a purchaser or a purchaser's authorized agent within ten days after receipt of a written notice of a pending sale that contains the name and address of the purchaser all of the following in either paper or electronic format:
1. A copy of the bylaws and the rules of the association.
2. A copy of the declaration.
3. A dated statement containing:
(a) The telephone number and address of a principal contact for the association, which may be an association manager, an association management company, an officer of the association or any other person designated by the board of directors.
(b) The amount of the common regular assessment and the unpaid common regular assessment, special assessment or other assessment, fee or charge currently due and payable from the selling member. If the request is made by a lienholder, escrow agent, member or person designated by a member pursuant to section 33-1807, failure to provide the information pursuant to this subdivision within the time provided for in this subsection shall extinguish any lien for any unpaid assessment then due against that property.
(c) A statement as to whether a portion of the unit is covered by insurance maintained by the association.
(d) The total amount of money held by the association as reserves.
(e) If the statement is being furnished by the association, a statement as to whether the records of the association reflect any alterations or improvements to the unit that violate the declaration. The association is not obligated to provide information regarding alterations or improvements that occurred more than six years before the proposed sale. Nothing in this subdivision relieves the seller of a unit from the obligation to disclose alterations or improvements to the unit that violate the declaration, nor precludes the association from taking action against the purchaser of a unit for violations that are apparent at the time of purchase and that are not reflected in the association's records.
(f) If the statement is being furnished by the member, a statement as to whether the member has any knowledge of any alterations or improvements to the unit that violate the declaration.
(g) A statement of case names and case numbers for pending litigation with respect to the unit filed by the association against the member or filed by the member against the association. The member shall not be required to disclose information concerning such pending litigation that would violate any applicable rule of attorney-client privilege under Arizona law.
(h) A statement that provides "I hereby acknowledge that the declaration, bylaws and rules of the association constitute a contract between the association and me (the purchaser). By signing this statement, I acknowledge that I have read and understand the association's contract with me (the purchaser). I also understand that as a matter of Arizona law, if I fail to pay my association assessments, the association may foreclose on my property." The statement shall also include a signature line for the purchaser and shall be returned to the association within fourteen calendar days.
4. A copy of the current operating budget of the association.
5. A copy of the most recent annual financial report of the association. If the report is more than ten pages, the association may provide a summary of the report in lieu of the entire report.
6. A copy of the most recent reserve study of the association, if any.
California
California Reserve Study Laws
The State of California has adopted specific statutes related to reserve studies, which are set forth in Davis-Stirling Common Interest Development Act, Civil Code Section 5550 through 5580.
Those statutes generally state the requirements for conducting reserve studies, managing reserve funds and making disclosures to owners regarding said funding. These requirements include a reserve study being conducted once every three years that involves those items which the association is obligated to repair, replace, restore or maintain, This study must identify those items with less than a 30 year useful life, estimate the probable remaining useful life, and estimate the cost of repair, restore, replace or maintain.
While a reserve study is obligated to be performed, California law does not require funding to the reserve accounts.
Common industry practice is that homeowners associations should perform periodic reserve studies as a prudent business practice. Directors of associations are generally held to a “prudent businessman” rule in determining whether or not they have met the fiduciary duty of their position for the association. A prudent businessman would establish a capital replacement budget (reserve study) to make sure he is generating enough revenues (reserve assessments) to provide for major repairs and replacements.
Davis-Stirling Common Interest Development Act
California law is codified as the Davis-Stirling Common Interest Development Act.
Sections 5550 through 5580 establish the overall requirements for reserve planning.
Sections 5570 establishes the budgetary reserve disclosure requirements.
Section 5550 establishes performance standards. These standards require a visual site inspection every three years.
California has established reserve study performance and disclosure requirements, but has not established any minimum funding requirements. The law does require disclosure of the funding plan, and also whether or not any special assessments are planned as any part of the 30-year funding plan.
Reserve sections of Davis-Stirling Common Interest Development Act.
5550.
(a) At least once every three years, the board shall cause to be conducted a reasonably competent and diligent visual inspection of the accessible areas of the major components that the association is obligated to repair, replace, restore, or maintain as part of a study of the reserve account requirements of the common interest development, if the current replacement value of the major components is equal to or greater than one-half of the gross budget of the association, excluding the association’s reserve account for that period. The board shall review this study, or cause it to be reviewed, annually and shall consider and implement necessary adjustments to the board’s analysis of the reserve account requirements as a result of that review.
(b) The study required by this section shall at a minimum include:
(1) Identification of the major components that the association is obligated to repair, replace, restore, or maintain that, as of the date of the study, have a remaining useful life of less than 30 years.
(2) Identification of the probable remaining useful life of the components identified in paragraph (1) as of the date of the study.
(3) An estimate of the cost of repair, replacement, restoration, or maintenance of the components identified in paragraph (1).
(4) An estimate of the total annual contribution necessary to defray the cost to repair, replace, restore, or maintain the components identified in paragraph (1) during and at the end of their useful life, after subtracting total reserve funds as of the date of the study.
(5) A reserve funding plan that indicates how the association plans to fund the contribution identified in paragraph (4) to meet the association’s obligation for the repair and replacement of all major components with an expected remaining life of 30 years or less, not including those components that the board has determined will not be replaced or repaired.
5560.
(a) The reserve funding plan required by Section 5550 shall include a schedule of the date and amount of any change in regular or special assessments that would be needed to sufficiently fund the reserve funding plan.
(b) The plan shall be adopted by the board at an open meeting before the membership of the association as described in Article 2 (commencing with Section 4900) of Chapter 6.
(c) If the board determines that an assessment increase is necessary to fund the reserve funding plan, any increase shall be approved in a separate action of the board that is consistent with the procedure described in Section 5605.
5565.
The summary of the association’s reserves required by paragraph (2) of subdivision (b) of Section 5300 shall be based on the most recent review or study conducted pursuant to Section 5550, shall be based only on assets held in cash or cash equivalents, shall be printed in boldface type, and shall include all of the following:
(a) The current estimated replacement cost, estimated remaining life, and estimated useful life of each major component.
(b) As of the end of the fiscal year for which the study is prepared:
(1) The current estimate of the amount of cash reserves necessary to repair, replace, restore, or maintain the major components.
(2) The current amount of accumulated cash reserves actually set aside to repair, replace, restore, or maintain major components.
(3) If applicable, the amount of funds received from either a compensatory damage award or settlement to an association from any person for injuries to property, real or personal, arising out of any construction or design defects, and the expenditure or disposition of funds, including the amounts expended for the direct and indirect costs of repair of construction or design defects. These amounts shall be reported at the end of the fiscal year for which the study is prepared as separate line items under cash reserves pursuant to paragraph (2). Instead of complying with the requirements set forth in this paragraph, an association that is obligated to issue a review of its financial statement pursuant to Section 5305 may include in the review a statement containing all of the information required by this paragraph.
(c) The percentage that the amount determined for purposes of paragraph (2) of subdivision (b) equals the amount determined for purposes of paragraph (1) of subdivision (b).
(d) The current deficiency in reserve funding expressed on a per unit basis. The figure shall be calculated by subtracting the amount determined for purposes of paragraph (2) of subdivision (b) from the amount determined for purposes of paragraph (1) of subdivision (b) and then dividing the result by the number of separate interests within the association, except that if assessments vary by the size or type of ownership interest, then the association shall calculate the current deficiency in a manner that reflects the variation.
5570.
(a) The disclosures required by this article with regard to an association or a property shall be summarized on the following form:
(5) All major components are included in the reserve study and are included in its calculations.
(6) Based on the method of calculation in paragraph (4) of subdivision (b) of Section 5570, the estimated amount required in the reserve fund at the end of the current fiscal year is $____, based in whole or in part on the last reserve study or update prepared by ____ as of ____ (month), ____ (year). The projected reserve fund cash balance at the end of the current fiscal year is $____, resulting in reserves being ____ percent funded at this date.
If an alternate, but generally accepted, method of calculation is also used, the required reserve amount is $____. (See attached explanation)
(7) Based on the method of calculation in paragraph (4) of subdivision (b) of Section 5570 of the Civil Code, the estimated amount required in the reserve fund at the end of each of the next five budget years is $______, and the projected reserve fund cash balance in each of those years, taking into account only assessments already approved and other known revenues, is $______, leaving the reserve at ______ percent funding. If the reserve funding plan approved by the association is implemented, the projected reserve fund cash balance in each of those years will be $______, leaving the reserve at ______ percent funding.
Note: The financial representations set forth in this summary are based on the best estimates of the preparer at that time. The estimates are subject to change. At the time this summary was prepared, the assumed long-term before-tax interest rate earned on reserve funds was ____ percent per year, and the assumed long-term inflation rate to be applied to major component repair and replacement costs was ____ percent per year.
(b) For the purposes of preparing a summary pursuant to this section:
(1) “Estimated remaining useful life” means the time reasonably calculated to remain before a major component will require replacement.
(2) “Major component” has the meaning used in Section 55530. Components with an estimated remaining useful life of more than 30 years may be included in a study as a capital asset or disregarded from the reserve calculation, so long as the decision is revealed in the reserve study report and reported in the Assessment and Reserve Funding Disclosure
Summary.
(3) The form set out in subdivision (a) shall accompany each annual budget report or summary thereof that is delivered pursuant to Section 5300. The form may be supplemented or modified to clarify the information delivered, so long as the minimum information set out in subdivision (a) is provided.
(4) For the purpose of the report and summary, the amount of reserves needed to be accumulated for a component at a given time shall be computed as the current cost of replacement or repair multiplied by the number of years the component has been in service divided by the useful life of the component. This shall not be construed to require the board to fund reserves in accordance with this calculation.
5580.
(a) Unless the governing documents impose more stringent standards, any community service organization whose funding from the association or its members exceeds 10 percent of the organization’s annual budget shall prepare and distribute to the association a report that meets the requirements of Section 5012 of the Corporations Code, and that describes in detail administrative costs and identifies the payees of those costs in a manner consistent with the provisions of Article 5 (commencing with Section 5200) of
Chapter 6.
(b) If the community service organization does not comply with the standards, the report shall disclose the noncompliance in detail. If a community service organization is responsible for the maintenance of major components for which an association would otherwise be responsible, the community service organization shall supply to the association the information regarding those components that the association would use to complete disclosures and reserve reports required under this article and Section 5300. An association may rely upon information received from a community service organization, and shall provide access to the information pursuant to the provisions of Article 5 (commencing with Section 5200) of Chapter 6.
Reserve Data Analyst California - San Francisco - San Diego - Los Angeles Offices
Colorado
Colorada Reserve Study Laws
There is no statutory requirement to conduct a reserve study and no statutory requirement to fund reserves.
The unit owners’ associations may adopt and amend budgets for revenues, expenditures, and reserves and impose and collect assessments for common expenses from unit owners. Section 38‐33.3‐302.
Condominium associations shall provide in the proposed budget for the condominium adequate reserves for capital expenditures. Section 47‐88e. Common interest community executive boards, at least annually, shall adopt a proposed budget for the common interest community for consideration by the unit owners. Not later than thirty days after the adoption of a proposed budget, the executive board shall provide to all unit owners a summary of the budget, including a statement of the amount of any reserves, and a statement of the basis on which such reserves are calculated and funded. Section 47‐261e. Resale disclosure statement must include the total amount of money held by the association as reserves. Section 47‐264(5).
If a reserve study is completed the following must be adhered to:
(IX) When the association has a reserve study prepared for the portions of the community maintained, repaired, replaced, and improved by the association; whether there is a funding plan for any work recommended by the reserve study and, if so, the projected sources of funding for the work; and whether the reserve study is based on a physical analysis and financial analysis. For the purposes of this subparagraph (IX), an internally conducted reserve study shall be sufficient.
Hawaii
Hawaii Reserve Study Laws
Condominium budgets shall include the amount of money in reserve, future reserve estimates based on a reserve study performed by the association, an explanation of how reserves are computed and the amount to be collected for reserves in the year ahead. The association shall compute the estimated replacement reserves by a formula that is based on the estimated life and the estimated capital expenditure or major maintenance required for each part of the property. The estimated replacement reserves shall include: adjustments for revenues which will be received and expenditures which will be made before the beginning of the fiscal year to which the budget relates; and separate, designated reserves for each part of the property for which capital expenditures or major maintenance will exceed $10,000. Parts of the property for which capital expenditures or major maintenance will not exceed $10,000 may be aggregated in a single designated reserve. Section 514B‐148.
[§514B-148] Association fiscal matters; budgets and reserves.
(a) The budget required under section 514B-144(a) shall include at least the following:
(1) The estimated revenues and operating expenses of the association;
(2) Information as to whether the budget has been prepared on a cash or accrual basis;
(3) The total replacement reserves of the association as of the date of the budget;
(4) The estimated replacement reserves the association will require to maintain the property based on a reserve study performed by the association;
(5) A general explanation of how the estimated replacement reserves are computed;
(6) The amount the association must collect for the fiscal year to fund the estimated replacement reserves; and
(7) Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves was calculated using a per cent funded or cash flow plan. The method or plan shall not circumvent the estimated replacement reserves amount determined by the reserve study pursuant to paragraph (4).
(b) The association shall assess the unit owners to either fund a minimum of fifty percent of the estimated replacement reserves or fund one hundred per cent of the estimated replacement reserves when using a cash flow plan; provided that a new association need not collect estimated replacement reserves until the fiscal year which begins after the association’s first annual meeting. For each fiscal year, the association shall collect the amount assessed to fund the estimated replacement for that fiscal year reserves, as
determined by the association’s plan.
(c) The association shall compute the estimated replacement reserves by a formula that is based on the estimated life and the estimated capital expenditure or major maintenance required for each part of the property. The estimated replacement reserves shall include:
(1) Adjustments for revenues which will be received and expenditures which will be made before the beginning of the fiscal year to which the budget relates; and
(2) Separate, designated reserves for each part of the property for which capital expenditures or major maintenance will exceed $10,000. Parts of the property for which capital expenditures or major maintenance will not exceed $10,000 may be aggregated in a single designated reserve.
(d) No association or unit owner, director, officer, managing agent, or employee of an association who makes a good faith effort to calculate the estimated replacement reserves for an association shall be liable if the estimate subsequently proves incorrect.
(e) Except in emergency situations or with the approval of a majority of the unit owners, a board may not exceed its total adopted annual operating budget by more than twenty per cent during the fiscal year to which the budget relates. Before imposing or collecting an assessment under this subsection that has not been approved by a majority of the unit owners, the board shall adopt a resolution containing written findings as to the necessity of the extraordinary expense involved and why the expense was not or could not have been reasonably foreseen in the budgeting process, and the resolution shall be distributed to the members with the notice of assessment.
(f) The requirements of this section shall override any requirements in an association’s declaration, bylaws,or any other association documents relating to preparation of
budgets, calculation of reserve requirements, assessment and funding of reserves, and expenditures from reserves with the exception of:
(1) Any requirements in an association’s declaration, bylaws, or any other association documents which require the association to collect more than fifty per cent of reserve requirements; or
(2) Any provisions relating to upgrading the common elements, such as additions, improvements, and alterations to the common elements.
(g) Subject to the procedures of section 514B-157 and any rules adopted by the commission, any unit owner whose association board fails to comply with this section may enforce compliance by the board. In any proceeding to enforce compliance, a board that has not prepared an annual operating budget and reserve study shall have the burden of proving it has complied with this section.
(h) As used in this section: “Capital expenditure” means an expense that results from the purchase or replacement of an asset whose life is greater than one year, or the addition of an asset that extends the life of an existing asset for a period greater than one year. “Cash flow plan” means a minimum twenty-year projection of an association’s future income and expense requirements to fund fully its replacement reserves requirements each year during that twenty-year period, except in an emergency; provided that it does not include a projection of special assessments or loans during that twenty-year period, except in an emergency. “Emergency situation” means any extraordinary expenses:
(1) Required by an order of a court;
(2) Necessary to repair or maintain any part of the property for which the association is responsible where a threat to personal safety on the property is discovered;
(3) Necessary to repair any part of the property for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the annual operating budget;
(4) Necessary to respond to any legal or administrative proceeding brought against the association that could not have been reasonably foreseen by the board in preparing and distributing the annual operating budget; or
(5) Necessary for the association to obtain adequate insurance for the property which the association must insure. “Major maintenance” means an expenditure for maintenance or repair that will result in extending the life of an asset for a period greater than one year. “Replacement Reserves” means funds for the upkeep, repair, or replacement of those parts of the property, including but not limited to roofs, walls, decks, paving, and equipment, that the association is obligated to maintain.
Idaho
Idaho Reserve Study Law
The State of Idaho has not adopted any specific statutes related to reserve studies.
Nevada
Nevada Reserve Study Law
The State of Nevada has adopted specific statutes related to reserve studies, which are set forth in section NRS 116.31152 of the state’s civil statutes.
Those statutes generally provide that a reserve study be conducted at least every 5 years. It must be reviewed and studied annually to determine sufficient funds.
Nevada Revised Statutes
NRS 116.31152 Study of reserves; duties of executive board regarding study; person who conducts study required to hold permit; contents of study; submission of summary of study to Division; use of money credited against residential construction tax for upkeep of park facilities and related improvements identified in study.
1. The executive board shall:
(a) At least once every 5 years, cause to be conducted a study of the reserves required to repair, replace and restore the major components of the common elements;
(b) At least annually, review the results of that study to determine whether those reserves are sufficient; and
(c) At least annually, make any adjustments to the association’s funding plan which the executive board deems necessary to provide adequate funding for the required reserves.
2. The study of the reserves required by subsection 1 must be conducted by a person who holds a permit issued pursuant to chapter 116A of NRS.
3. The study of the reserves must include, without limitation:
(a) A summary of an inspection of the major components of the common elements that the association is obligated to repair, replace or restore;
(b) An identification of the major components of the common elements that the association is obligated to repair, replace or restore which have a remaining useful life of less than 30 years;
(c) An estimate of the remaining useful life of each major component of the common elements identified pursuant to paragraph (b);
(d) An estimate of the cost of repair, replacement or restoration of each major component of the common elements identified pursuant to paragraph (b) during and at the end of its useful life; and
(e) An estimate of the total annual assessment that may be necessary to cover the cost of repairing, replacement or restoration of the major components of the common elements identified pursuant to paragraph (b), after subtracting the reserves of the association as of the date of the study, and an estimate of the funding plan that may be necessary to provide adequate funding for the required reserves.
4. A summary of the study of the reserves required by subsection 1 must be submitted to the Division not later than 45 days after the date that the executive board adopts the results of the study.
5. If a common-interest community was developed as part of a planned unit development pursuant to chapter 278A of NRS and is subject to an agreement with a city or county to receive credit against the amount of the residential construction tax that is imposed pursuant to NRS 278.4983 and 278.4985, the association that is organized for the common-interest community may use the money from that credit for the repair, replacement or restoration of park facilities and related improvements if:
(a) The park facilities and related improvements are identified as major components of the common elements of the association; and
(b) The association is obligated to repair, replace or restore the park facilities and related improvements in accordance with the study of the reserves required by subsection 1.
(Added to NRS by 1999, 2994; A 2003, 2241; 2005, 2606)
NRS 116.31153 Signatures required for withdrawals from reserve account of association. Money in the reserve account of an association required by paragraph (b) of subsection 2 of NRS 116.3115 may not be withdrawn without the signatures of at least two members of the executive board or the signatures of at least one member of the executive board and one officer of the association who is not a member of the executive board.
(Added to NRS by 1999, 2995)
Nevada Administrative Code
NAC 116.425 Reserve Study: Contents. (NRS 116.31152, 116.615)
1. A reserve study must, in addition to the requirements set forth in NRS 116.31152, include:
(a) A copy of the component inventory from the previous reserve study if such copy was provided by the executive board to the person conducting the reserve study;
(b) A 30-year schedule which shows:
(1) The projected increase in assessments that will be required in any given year to provide an adequately funded reserve; and
(2) The projected inflation and estimated interest income from the reserve fund;
(c) The names and credentials of any consultants and other persons with expertise used to assist in the preparation of the reserve study;
(d) Any written reports prepared by consultants and other persons with expertise;
(e) If there are any conflicting recommendations of the consultants or other persons with expertise while preparing the reserve study, a written explanation as to which recommendations are selected and the reasons for their selection;
(f) The disclosures set forth in NAC 116.430; and
(g) A statement, prominently displayed, which reads substantially as follows:
The projected life expectancy of the major components and the funding needs of the reserves of the association are based upon the association performing appropriate routine and preventative maintenance for each major component. Failure to perform such maintenance can negatively impact the remaining useful life of the major components and dramatically increase the funding needs of the reserves of the association.
2. As used in this section, “adequately funded reserve” means the funds sufficient to maintain the common elements:
(a) At the level described in the governing documents and in a reserve study; and
(b) Without using the funds from the operating budget or without special assessments, except for occurrences that are a result of unforeseen catastrophic events.
(Added to NAC by Comm’n for Common-Interest Communities by R129-04, eff. 4-14-2005)
NAC 116.430 Reserve study: Required disclosures. (NRS 116.31152, 116.615) A person conducting a reserve study and any consultant assisting in the preparation of a reserve study shall include in the reserve study the following disclosures:
1. The background, training, qualifications and references that would qualify the person conducting or assisting in the preparation of the reserve study as competent to conduct or assist in the preparation of the reserve study;
2. Any relationship which could result in actual or perceived conflicts of interest;
3. Whether the person conducting or assisting in the preparation of the reserve study is bonded or has professional liability insurance;
4. The method for determining the common area components based on:
(a) An actual field inspection of the common elements with representative sampling;
(b) An inventory and material information provided by the client; or
(c) A previous reserve study and the date of that study;
5. Industry sources used for determining:
(a) The life of a major component; and
(b) The cost of repairing, replacing or restoring a major component;
6. Any guarantees, express or implied, that are given with the predictions for the cost or life expectancy of any of the major components;
7. The source of the information regarding the initial reserve fund balance presented in the reserve study; and
8. Whether a special assessment is anticipated during the time of the contracted reserve study.
(Added to NAC by Comm’n for Common-Interest Communities by R129-04, eff. 4-14-2005)
NAC 116.435 Reserve study: Dissemination of summary of results. (NRS 116.31152, 116.615) An executive board shall submit a summary of the results of the reserve study to the Commission pursuant to subsection 4 of NRS 116.31152 by filing, electronically if possible, on a form prescribed by the Division, the summary of the results of the reserve study with the Division. The Division may post the summary of the results of the reserve studies filed with the Division on its website.
(Added to NAC by Comm’n for Common-Interest Communities by R129-04, eff. 4-14-2005)
NAC 116.430 Reserve study: Required disclosures. (NRS 116.31152, 116.615)
A person conducting a reserve study and any consultant assisting in the preparation of a reserve study shall include in the reserve study the following disclosures:
1. The background, training, qualifications and references that would qualify the person conducting or assisting in the preparation of the reserve study as competent to conduct or assist in the preparation of the reserve study.
2. Any relationship which could result in actual or perceived conflicts of interest.
3. Whether the person conducting or assisting in the preparation of the reserve study is bonded or has professional liability insurance with a minimum coverage of $1,000,000.
4. The method or methods for determining the common area components based on:
(a) An actual on-site inspection of the common elements with representative sampling;
(b) An inventory and material information provided by the client;
(c) A previous reserve study and the date of that study; or
(d) Plats, governing documents or any other additional industry resources used by the person conducting or assisting in the preparation of the reserve study.
5. Industry sources used for determining:
(a) The life of a major component of the common elements; and
(b) The cost of maintaining, repairing, replacing or restoring a major component of the common elements.
6. If known, any guarantees, express or implied, that are provided by any component manufacturer or service provider, with the predictions that would affect the cost or life expectancy of any of the major components.
7. The source of the initial reserve fund balance presented in the reserve study.
8. Whether a reserve assessment is anticipated during the current 30-year life of the reserve study.
9. The source of the interest rate and inflation rate assumptions used in the 30-year projection contained in the reserve study.
10. A statement, prominently displayed, which reads substantially as follows:
Information provided to the preparer of a reserve study by an official representative of the association regarding financial, historical, physical, quantitative or reserve project issues will be deemed reliable by the preparer. A reserve study will be a reflection of information provided to the preparer of the reserve study. The total of actual or projected reserves required as presented in the reserve study is based upon information provided that was not audited.
A reserve study is not intended to be used to perform an audit, an analysis of quality, a forensic study or a background check of historical records. An on-site inspection conducted in conjunction with a reserve study should not be deemed to be a project audit or quality inspection.
11. A listing of any significant components of the common-interest community that the association may be obligated to maintain, repair, replace or restore which are not included in the funding projection in the reserve study and the reason for excluding those components from that funding projection.
12. For updated reserve studies, a statement, prominently displayed, which reads substantially as follows:
Quantities of major components of the common elements as reported in previous reserve studies are deemed to be accurate and reliable. This reserve study relies upon the validity of previous reserve studies.
(Added to NAC by Comm’n for Common-Interest Communities by R129-04, eff. 4-14-2005; A by Comm’n for Common-Interest Communities & Condo. Hotels by R145-06, 4-17-2008; R050-13, 8-10-2015)
New Mexico
New Mexico Reserve Study Law
The State of New Mexico has not adopted any specific statutes related to reserve study preparation or requirement for disclosures. The New Mexico Condominium Act is set forth is Chapter 47, Article 7 of the New Mexico Administrative Code.
Sellers must present prospective buyers with a disclosure stating the current Reserve Balance and the amount in the budget allocated to Reserves.
Link: Albuquerque Office Link
Oregon
Oregon Reserve Study Law
The State of Oregon has adopted specific statutes related to reserve studies for condominiums, which are set forth in section 100.175 of the Oregon Condominium Act. The Act generally establishes a requirement on the Declarant to provide both a maintenance plan and a reserve study for the association prior to turnover. While the Act does not specifically extend this requirement to the owner-controlled Board of Directors, that extension is implied. For all practical purposes, this section establishes a reserve study requirement for all Oregon condominium projects.
The full text of this section is shown below.
100.175 Reserve account for maintaining, repairing and replacing common elements; reserve study; maintenance plan.
(1) The declarant, on behalf of the association of unit owners, shall:
(a) Conduct an initial reserve study as described in subsection (3) of this section;
(b) Prepare an initial maintenance plan as described in subsection (4) of this section; and
(c) Establish a reserve account as provided in subsection (2) of this section.
(2)
(a) A reserve account shall be established to fund major maintenance, repair or replacement of those common elements all or part of which will normally require major maintenance, repair or replacement in more than one and less than 30 years, for exterior painting if the common elements include exterior painted surfaces, and for such other items as may be required by the declaration or bylaws. The reserve account need not include:
(A) Items that can reasonably be funded from the general budget or other funds or accounts of the association; or
(B) A reserve for limited common elements for which maintenance and replacement are the responsibility of one or more, but less than all, unit owners under the provisions of the declaration or bylaws.
(b) The reserve account shall be established in the name of the association of unit owners. The association is responsible for administering the account and for making periodic payments into the account.
(c) The reserve portion of the initial assessment determined by the declarant shall be based on:
(A) The reserve study described in subsection (3) of this section;
(B) In the case of a conversion condominium, the statement described in ORS 100.655 (1)(g); or
(C) Other reliable information.
(d) The reserve account must be funded by assessments against the individual units for the purposes for which the reserve account is established.
(e) The assessment under this subsection accrues from the time of the conveyance of the first individual unit assessed as provided in ORS 100.530.
(3)
(a) The board of directors of the association annually shall conduct a reserve study or review and update an existing study to determine the reserve account requirements and may:
(A) Adjust the amount of payments in accordance with the study or review; and
(B) Provide for other reserve items that the board of directors, in its discretion, may deem appropriate.
(b) The reserve study shall:
(A) Identify all items for which reserves are or will be established;
(B) Include the estimated remaining useful life of each item as of the date of the reserve study; and
(C) Include for each item, as applicable, an estimated cost of maintenance and repair and replacement at the end of the item’s useful life.
(4)
(a) The board of directors shall prepare a maintenance plan for the maintenance, repair and replacement of all property for which the association has maintenance, repair or replacement responsibility under the declaration or bylaws or this chapter. The maintenance plan shall:
(A) Describe the maintenance, repair and replacement to be conducted;
(B) Include a schedule for the maintenance, repair and replacement;
(C) Be appropriate for the size and complexity of the maintenance, repair and replacement responsibility of the association; and
(D) Address issues that include but are not limited to warranties and the useful life of the items for which the association has maintenance, repair or replacement responsibility.
(b) The board of directors shall review and update the maintenance plan described under this subsection as necessary.
(5)
(a) Except as provided in paragraph (b) of this subsection, the reserve study requirements under subsection (3) of this section and the maintenance plan requirements under subsection (4) of this section do not apply to a condominium consisting of one or two units, excluding units used for parking, storage or other uses ancillary to a unit:
(A) After the sale of the first unit to a person other than a successor declarant, if the condominium is created on or after September 27, 2007; or
(B) If the condominium was created before September 27, 2007, notwithstanding any requirement in the declaration or bylaws.
(b) The reserve study requirements under subsection (3) of this section and the maintenance plan requirements under subsection (4) of this section apply to a flexible condominium or a staged condominium created on or after September 27, 2007, if the condominium might in the future consist of more than two units.
(6)
(a) If the declaration or bylaws require a reserve account, the reserve study requirements of subsection (3) of this section and the maintenance plan requirements of subsection (4) of this section first apply to the association of a condominium recorded prior to October 23, 1999:
(A) Upon adoption of a resolution by the board of directors in accordance with the bylaws providing that the requirements of subsections (3) and (4) of this section apply to the association; or
(B) Upon submission to the board of directors of a petition signed by a majority of unit owners mandating that the requirements of subsections (3) and (4) of this section apply to the association.
(b) The reserve study and the maintenance plan shall be completed within one year of the date of adoption of the resolution or submission of the petition to the board of directors.
(7)
(a) Except as provided in paragraph (b) of this subsection, the reserve account is to be used only for the purposes for which reserves have been established and is to be kept separate from other funds.
(b) After the individual unit owners have assumed administrative responsibility for the association under ORS 100.210, if the board of directors has adopted a resolution, which may be an annual continuing resolution, authorizing the borrowing of funds:
(A) The board of directors may borrow funds from the reserve account to meet high seasonal demands on the regular operating funds or to meet unexpected increases in expenses.
(B) Not later than the adoption of the budget for the following year, the board of directors shall adopt by resolution a written payment plan providing for repayment of the borrowed funds within a reasonable period.
(8) Restrictions on the use of the reserve account do not prohibit its prudent investment subject to any constraints on investment of association funds imposed by the declaration, bylaws or rules of the association of unit owners.
(9) Assessments paid into the reserve account are the property of the association of unit owners and are not refundable to sellers of units.
(10) In addition to the authority of the board of directors under subsection (3)(a) of this section, following turnover, the association may:
(a) On an annual basis, elect not to fund the reserve account described in subsection (1) of this section by unanimous vote of the owners; or
(b) Elect to reduce or increase future assessments for the reserve account described in subsection (1) of this section by an affirmative vote of at least 75 percent of the owners. [Formerly 94.072; 1997 c.816 §7; 1999 c.677 §44; 2001 c.756 §34; 2003 c.569 §27; 2005 c.543 §2; 2007 c.409 §23]
Utah
Utah Reserve Study Law
Link: Utah Condominium Act
Effective 5/12/2015
57-8-7.5. Reserve analysis -- Reserve fund.
(1)As used in this section:(a)"Reserve analysis" means an analysis to determine:
(i)the need for a reserve fund to accumulate reserve funds; and
(ii)the appropriate amount of any reserve fund.
(b)"Reserve fund line item" means the line item in an association of unit owners' annual budget that identifies the amount to be placed into a reserve fund.
(c)"Reserve funds" means money to cover the cost of repairing, replacing, or restoring common areas and facilities that have a useful life of three years or more and a remaining useful life of less than 30 years, if the cost cannot reasonably be funded from the general budget or other funds of the association of unit owners.
(2)Except as otherwise provided in the declaration, a management committee shall:
(a)cause a reserve analysis to be conducted no less frequently than every six years; and
(b)review and, if necessary, update a previously conducted reserve analysis no less frequently than every three years.
(3)The management committee may conduct a reserve analysis itself or may engage a reliable person or organization, as determined by the management committee, to conduct the reserve analysis.
(4)A reserve fund analysis shall include:
(a)a list of the components identified in the reserve analysis that will reasonably require reserve funds;
(b)a statement of the probable remaining useful life, as of the date of the reserve analysis, of each component identified in the reserve analysis;
(c)an estimate of the cost to repair, replace, or restore each component identified in the reserve analysis;
(d)an estimate of the total annual contribution to a reserve fund necessary to meet the cost to repair, replace, or restore each component identified in the reserve analysis during the component's useful life and at the end of the component's useful life; and
(e)a reserve funding plan that recommends how the association of unit owners may fund the annual contribution described in Subsection (4)(d).
(5)An association of unit owners shall:
(a)annually provide unit owners a summary of the most recent reserve analysis or update; and
(b)provide a copy of the complete reserve analysis or update to a unit owner who requests a copy.
(6)In formulating its budget each year, an association of unit owners shall include a reserve fund line item in:
(a)an amount the management committee determines, based on the reserve analysis, to be prudent; or
(b)an amount required by the declaration, if the declaration requires an amount higher than the amount determined under Subsection (6)(a).
(7)
(a)Within 45 days after the day on which an association of unit owners adopts its annual budget, the unit owners may veto the reserve fund line item by a 51% vote of the allocated voting interests in the association of unit owners at a special meeting called by the unit owners for the purpose of voting whether to veto a reserve fund line item.
(b)If the unit owners veto a reserve fund line item under Subsection (7)(a) and a reserve fund line item exists in a previously approved annual budget of the association of unit owners that was not vetoed, the association of unit owners shall fund the reserve account in accordance with that prior reserve fund line item.
(8)(a)Subject to Subsection (8)(b), if an association of unit owners does not comply with the requirements of Subsection (5), (6), or (7) and fails to remedy the noncompliance within the time specified in Subsection (8)(c), a unit owner may file an action in state court for:
(i)injunctive relief requiring the association of unit owners to comply with the requirements of Subsection (5), (6), or (7);
(ii)$500 or actual damages, whichever is greater;
(iii)any other remedy provided by law; and
(iv)reasonable costs and attorney fees.
(b)No fewer than 90 days before the day on which a unit owner files a complaint under Subsection (8)(a), the unit owner shall deliver written notice described in Subsection (8)(c) to the association of unit owners.
(c)A notice under Subsection (8)(b) shall state:
(i)the requirement in Subsection (5), (6), or (7) with which the association of unit owners has failed to comply;
(ii)a demand that the association of unit owners come into compliance with the requirements; and
(iii)a date, no fewer than 90 days after the day on which the unit owner delivers the notice, by which the association of unit owners shall remedy its noncompliance.
(d)In a case filed under Subsection (8)(a), a court may order an association of unit owners to produce the summary of the reserve analysis or the complete reserve analysis on an expedited basis and at the association of unit owners' expense.
(9)(a)A management committee may not use money in a reserve fund:
(i)for daily maintenance expenses, unless a majority of the members of the association of unit owners vote to approve the use of reserve fund money for that purpose; or
(ii)for any purpose other than the purpose for which the reserve fund was established.
(b)A management committee shall maintain a reserve fund separate from other funds of the association of unit owners.
(c)This Subsection (9) may not be construed to limit a management committee from prudently investing money in a reserve fund, subject to any investment constraints imposed by the declaration.
(10)Subsections (2) through (9) do not apply to an association of unit owners during the period of administrative control.
(11)For a condominium project whose initial declaration is recorded on or after May 12, 2015, during the period of administrative control, for any property that the declarant sells to a third party, the declarant shall give the third party:
(a)a copy of the association of unit owners' governing documents; and
(b)a copy of the association of unit owners' most recent financial statement that includes any reserve funds held by the association of unit owners or by a subsidiary of the association of unit owners.
(12)Except as otherwise provided in this section, this section applies to each association of unit owners, regardless of when the association of unit owners was created.
Washington
Washington Reserve Study Law
Washington Uniform Common Interest Ownership Act
There have been some recent changes to the WA State laws regarding common interest communities. The State of Washington has enacted the Washington Uniform Common Interest Ownership Act which applies to communities built after July 1st 2018. This act can be reviewed at the following link: Washington Uniform Common Interest Ownership Act
Washington State Home Owner's Association Act
Home owners association built prior to July 1st, 2018 must abide by the Washington State Homeowner's Association Act which can be found at the following link: Washington State Home Owner's Association Act
Washington State Condominium Act
Condominiums Built prior to July 1st, 2018 must abide by the Washington State Condominium Act. These laws can be viewed at the following link: Washington State Condominium Act
The State of Washington has adopted specific statutes related to reserve studies. State statute 64.34.380 recently adopted the following legislation:
(1) An association is encouraged to establish a reserve account to fund major maintenance, repair, and replacement of common elements, including limited common elements that will require major maintenance, repair, or replacement within thirty years. A reserve account shall be established in the name of the association. The board of directors is responsible for administering the reserve account.
(2) Unless doing so would impose an unreasonable hardship, an association shall prepare and update a reserve study, in accordance with the association's governing documents and RCW 64.34.224(1). The initial reserve study must be based upon a visual site inspection conducted by a reserve study professional.
(3) Unless doing so would impose an unreasonable hardship, the association shall update the reserve study annually. At least every three years, an updated reserve study must be prepared and based upon a visual site inspection conducted by a reserve study professional.
Full text of law follows:
RCW 64.34.380 - Reserve account — Reserve study — Annual update.
(1) An association is encouraged to establish a reserve account with a financial institution to fund major maintenance, repair, and replacement of common elements, including limited common elements that will require major maintenance, repair, or replacement within thirty years. If the association establishes a reserve account, the account must be in the name of the association. The board of directors is responsible for administering the reserve account.
(2) Unless doing so would impose an unreasonable hardship, an association with significant assets shall prepare and update a reserve study, in accordance with the association's governing documents and RCW 64.34.224(1). The initial reserve study must be based upon a visual site inspection conducted by a reserve study professional.
(3) Unless doing so would impose an unreasonable hardship, the association shall update the reserve study annually. At least every three years, an updated reserve study must be prepared and based upon a visual site inspection conducted by a reserve study professional.
(4) This section and RCW 64.34.382 through 64.34.392 apply to condominiums governed by chapter 64.32 RCW or this chapter and intended in whole or in part for residential purposes. These sections do not apply to condominiums consisting solely of units that are restricted in the declaration to nonresidential use. An association's governing documents may contain stricter requirements.
RCW 64.34.382 - Reserve study — Contents.
(1) A reserve study as described in RCW 64.34.380 is supplemental to the association's operating and maintenance budget. In preparing a reserve study, the association shall estimate the anticipated major maintenance, repair, and replacement costs, whose infrequent and significant nature make them impractical to be included in an annual budget.
(2) A reserve study must include:
(a) A reserve component list, including roofing, painting, paving, decks, siding, plumbing, windows, and any other reserve component that would cost more than one percent of the annual budget for major maintenance, repair, or replacement. If one of these reserve components is not included in the reserve study, the study should provide commentary explaining the basis for its exclusion. The study must also include quantities and estimates for the useful life of each reserve component, remaining useful life of each reserve component, and current repair and replacement cost for each component;
(b) The date of the study and a statement that the study meets the requirements of this section;
(c) The following level of reserve study performed:
(i) Level I: Full reserve study funding analysis and plan;
(ii) Level II: Update with visual site inspection; or
(iii) Level III: Update with no visual site inspection;
(d) The association's reserve account balance;
(e) The percentage of the fully funded balance that the reserve account is funded;
(f) Special assessments already implemented or planned;
(g) Interest and inflation assumptions;
(h) Current reserve account contribution rate;
(i) A recommended reserve account contribution rate, a contribution rate for a full funding plan to achieve one hundred percent fully funded reserves by the end of the thirty-year study period, a baseline funding plan to maintain the reserve balance above zero throughout the thirty-year study period without special assessments, and a contribution rate recommended by a reserve study professional;
(j) A projected reserve account balance for thirty years and a funding plan to pay for projected costs from those reserves without reliance on future unplanned special assessments; and
(k) A statement on whether the reserve study was prepared with the assistance of a reserve study professional.
(3) A reserve study shall include the following disclosure:
"This reserve study should be reviewed carefully. It may not include all common and limited common element components that will require major maintenance, repair, or replacement in future years, and may not include regular contributions to a reserve account for the cost of such maintenance, repair, or replacement. The failure to include a component in a reserve study, or to provide contributions to a reserve account for a component, may, under some circumstances, require you to pay on demand as a special assessment your share of common expenses for the cost of major maintenance, repair, or replacement of a reserve component."
RCW 64.34.384 - Reserve account — Withdrawals.
An association may withdraw funds from its reserve account to pay for unforeseen or unbudgeted costs that are unrelated to maintenance, repair, or replacement of the reserve components. The board of directors shall record any such withdrawal in the minute books of the association, cause notice of any such withdrawal to be hand delivered or sent prepaid by first-class United States mail to the mailing address of each unit or to any other mailing address designated in writing by the unit owner, and adopt a repayment schedule not to exceed twenty-four months unless it determines that repayment within twenty-four months would impose an unreasonable burden on the unit owners. Payment for major maintenance, repair, or replacement of the reserve components out of cycle with the reserve study projections or not included in the reserve study may be made from the reserve account without meeting the notification or repayment requirements under this section.
RCW 64.34.386 - Reserve study — Demand by owners — Study not timely prepared.
(1) Where more than three years have passed since the date of the last reserve study prepared by a reserve study professional, the owners of the units to which at least twenty percent of the votes are allocated may demand, in writing, to the association that the cost of a reserve study be included in the next budget and that the study be obtained by the end of that budget year. The written demand must refer to this section. The board of directors shall, upon receipt of the written demand, provide unit owners making the demand reasonable assurance that the board of directors will include a reserve study in the next budget and, if the budget is not rejected by the owners, will arrange for the completion of a reserve study.
(2) In the event a written demand is made and a reserve study is not timely prepared, a court may order specific performance and award reasonable attorneys' fees to the prevailing party in any legal action brought to enforce this section. An association may assert unreasonable hardship as an affirmative defense in any action brought against it under this section. Without limiting this affirmative defense, an unreasonable hardship exists where the cost of preparing a reserve study would exceed ten percent of the association's annual budget.
(3) A unit owner's duty to pay for common expenses shall not be excused because of the association's failure to comply with this section or RCW 64.34.382 through 64.34.390. A budget ratified by the unit owners under RCW 64.34.308(3) may not be invalidated because of the association's failure to comply with this section or RCW 64.34.382 through 64.34.390.
RCW 64.34.388 - Reserve study — Decision making.
Subject to RCW 64.34.386, the decisions relating to the preparation and updating of a reserve study must be made by the board of directors of the association in the exercise of the reasonable discretion of the board. Such decisions must include whether a reserve study will be prepared or updated, and whether the assistance of a reserve study professional will be utilized.
RCW 64.34.390 - Reserve study — Reserve account — Immunity from liability.
Monetary damages or any other liability may not be awarded against or imposed upon the association, the officers or board of directors of the association, or those persons who may have provided advice or assistance to the association or its officers or directors, for failure to: Establish a reserve account; have a current reserve study prepared or updated in accordance with RCW 64.34.380 through 64.34.388; or make the reserve disclosures in accordance with RCW 64.34.382 and 64.34.410(1) and 64.34.425(1)(s).
RCW 64.34.392 - Reserve Account and Study — Exemption — Disclosure.
(1) A condominium association with ten or fewer unit owners is not required to follow the requirements under RCW 64.34.380 through 64.34.390 if two-thirds of the owners agree to exempt the association from the requirements.
(2) The unit owners must agree to maintain an exemption under subsection (1) of this section by a two-thirds vote every three years.
(3) Notwithstanding subsections (1) and (2) of this section, a disclosure that the condominium association does not have a reserve study must be included in a unit's public offering statement as required under RCW 64.34.410 or resale certificate as required under RCW 64.34.425