Mastering Reserve Studies and Budgeting

The 2021 collapse of Champlain Towers South in Surfside, Florida, led many associations to take a closer look at how they handle maintenance and reserves. The Community Associations Institute (CAI) reports that seven states changed their laws after the collapse: Colorado, Florida, Hawaii, Maryland, New Jersey, Tennessee, and Washington.

State law now plays a bigger part in reserve planning. CAI reports that 33 states have enacted laws regulating reserve funding and studies. In its June 2026 summary of state reserve fund laws, CAI lists 12 states that require reserve studies or reserve schedules for condominium associations and 12 states that require reserve funding for condominium associations. Requirements vary widely from state to state.

A few examples from that summary show how much the rules differ:

• California: boards must conduct a visual inspection at least once every three years as part of a study of reserve account requirements, and review that study every year.
• Virginia: associations must conduct a reserve study at least once every five years, and the board must review it at least once a year.
• Hawaii: a condominium's reserve study must be reviewed by an independent reserve study preparer and updated every three years. Small associations can waive the independent review by owner vote.
• Florida: condominium reserve amounts are tied to the association's structural integrity reserve study.

These are summaries, not legal advice. Your state's law and your governing documents decide what applies to your community, so ask your association's attorney.

A reserve study also supports safety planning. The physical analysis shows which major systems need attention and when, which gives your board time to plan repairs before they become emergencies. A reserve study is not a structural inspection, though. CAI's standards state that structural integrity evaluations are not included in a reserve study unless otherwise noted, so ask your provider what the report covers.

Waiting costs more in the long run. Delaying a reserve study or underfunding reserves can look like a way to save money. It can lead to:

• Special assessments that catch residents off guard
• A loss of trust in the board
• Faster deterioration of buildings
• Missed warning signs of safety risks

An updated reserve study lets you plan ahead, make informed decisions, and keep residents informed.

A reserve study has two main parts, a physical analysis and a financial analysis. Together, they form a long-term plan for maintaining your community's shared assets.

Physical analysis. A reserve study provider inspects the major common components of your community, such as:

• Roofs
• Siding and exteriors
• HVAC systems
• Elevators
• Plumbing and electrical systems
• Parking lots
• Pools, gyms, and other amenities

The provider estimates the useful life of each component and when it will need to be replaced.

Financial analysis. This part compares your current reserve balance with what you will need in the future. It includes:

• Your current reserve fund balance
• An estimate of major future expenses
• A funding plan with the yearly contribution needed to keep your fund on track

The funding goal your board chooses shapes that yearly number, which the next section explains.

How often should you update your reserve study? CAI's standards describe a site inspection-based update at least every third year as best practice. Your state may set its own schedule, and some states require an update at least every five years. Update sooner if:

• You complete major capital repairs or replacements
• Your component inventory or its condition changes significantly
• New legislation or inspection requirements take effect

A current study means your budget reflects the real condition and needs of your property, and it strengthens your board's credibility when it explains spending to residents.

How to choose a reserve study provider. Look for a company with experience in properties like yours. CAI's Reserve Study Standards describe the Reserve Specialist (RS) designation as the most qualified credential for preparing reserve studies, and they also accept other nationally recognized credentials for reserve study providers. Ask for sample reports, check references, and confirm the provider completes both the physical and the financial analysis. A good provider communicates clearly and gives you practical funding recommendations.

CAI's Reserve Study Standards describe three funding goals, ranging from the most aggressive to the most conservative. Each carries a different level of risk.

• Baseline funding. The reserve cash balance approaches but never falls below zero. This goal keeps contributions low and carries the greatest risk of falling short when major components need replacing. CAI does not recommend it as a long-term plan, because it can lead to project delays, special assessments, or a line of credit.
• Threshold funding. The reserve balance stays above a minimum dollar amount or percent funded that your board sets. Depending on the threshold you pick, this goal can be weaker or stronger than full funding.
• Full funding. The reserve balance stays at or near 100 percent funded. This is the most conservative goal and requires higher contributions, but it keeps the association best prepared for future replacement costs.

Some states also set funding requirements by law. If your state does, those requirements come first, and the goal you choose has to meet them.

Choosing a goal depends on your community's financial priorities, your tolerance for risk, and any requirements in your state. Pick the approach that gives your community long-term stability without putting unnecessary strain on residents.

Careful budgeting protects your reserve fund and keeps your community running smoothly year after year. Start with these five practices.

1. Budget for preventive maintenance. Fund periodic inspection and maintenance of systems such as HVAC, plumbing, and roofing. Preventive maintenance helps you find small problems before they become big ones.
2. Use historical data. Look at past spending to plan future budgets. Watch for patterns, such as vendors who regularly go over budget or costs that keep rising in certain areas.
3. Budget for professional services. Include recurring costs for legal representation, accounting, reserve studies, management services, software, and elections.
4. Phase in increases gradually. If you need to raise fees, spread the increase over several years and give residents a clear idea of how costs are expected to change so they can plan ahead.
5. Compare actual spending with your budget. Do not wait until year-end. Review your budget every quarter and adjust if costs rise or income drops.

Managing a budget and planning for reserves can feel overwhelming, especially for volunteer board members. The right tools keep your records in order and make it easier to explain your decisions to residents.

ManageHOA, BuildingLink's platform for HOAs, includes tools that support this work, and BuildingLink offers the same kinds of tools for condo communities. With them, your board can:

• Store building documents, such as inspection reports, past reserve studies, and budgets, in the document library and share them with residents.
• Keep equipment details, such as purchase dates, costs, warranty information, and specs, in the equipment directory, and link maintenance requests to each item.
• Run an equipment replacement report that projects replacement dates and costs by year, based on the installation date, useful life, and replacement cost you enter for each item. It supports your planning but does not replace a professional reserve study.
• Schedule recurring preventive maintenance tasks, which create a new maintenance request each time one comes due.
• Send budget updates and meeting notices to residents by email broadcasting and announcements.

With your records and resident updates in one place, your board can stay organized and keep residents in the loop.

Budgeting and reserve planning affect every member of the community. When residents understand how decisions are made and why certain expenses are unavoidable, they are more likely to trust the board and support long-term planning. Clear, consistent communication keeps everyone on the same page.

These practices help:

• Explain the budgeting process early
• Share regular financial updates
• Reach residents through several channels, such as email, meetings, and printed notices
• Use simple visuals to explain complex financial information

Boards with the best intentions still make mistakes that hurt their community's long-term health. Watch for these five.

1. Underestimating reserve needs. Skipping key components or relying on an outdated study leads to underfunded reserves and surprise expenses.
2. Ignoring inflation. If you do not adjust for rising material and labor costs, your reserves can fall short.
3. Using reserves for daily expenses. Paying for everyday operations from the reserve fund weakens your financial stability. Your governing documents and state law may also limit how reserve money can be spent, so check with your attorney before moving money between funds.
4. Not getting resident buy-in. If residents do not understand why fees are rising, they may push back. Keep them informed and involved.
5. Forgetting to rebid vendor contracts. Staying with the same vendors without reviewing costs can mean you are overpaying. Competitive bids support value and transparency.