Reserve Study for a Condo Association: What It Measures, What the Law Requires, and How to Read One

The Community Associations Institute (CAI), which awards the Reserve Specialist (RS) designation, publishes Reserve Study Standards that divide a study into two parts.

• Physical analysis: the component inventory (what the association maintains), the condition assessment (what shape each component is in), and life and valuation estimates (useful life, remaining useful life and current replacement cost).
• Financial analysis: the fund status (how much is in reserves compared with what the components have already used up) and the funding plan (the contributions needed over the coming years).

A reserve study is a planning document, not an engineering investigation. It usually rests on visual observation, and it relies on structural or mechanical reports when the association has them. CAI's standards say preventive maintenance evaluations and periodic structural inspections should be updated before the reserve study update so the study can incorporate them.

Not every reserve study involves the same work. CAI's standards define four levels of service.

A Level III update is useful between site visits, but it inherits whatever the last inspection missed. If the most recent study with a site visit is old, the numbers rest on old observations.

Percent funded is the figure most owners hear about, and it is easy to misread. CAI defines it as the ratio of the actual or projected reserve balance to the fully funded balance. The fully funded balance is the share of each component's replacement cost that has already been used up: current cost multiplied by effective age, divided by useful life. CAI's own example is a $10,000 component with a 10-year useful life and 4 years of effective age, which has a fully funded balance of $4,000.

Add that up across every component and compare it to the bank balance. Say an association's components add up to a fully funded balance of $1,500,000, and it holds $600,000 in reserves. It is 40 percent funded. CAI cautions that percent funded is not by itself a measure of adequacy; the timing of upcoming projects matters as much.

The funding plan follows one of four goals in CAI's standards:

• Baseline funding: keeps the reserve balance above zero throughout the projection. CAI does not recommend it as a long-term plan.
• Threshold funding: keeps reserves above a set dollar amount or percent funded figure.
• Full funding: aims to keep reserves at or near 100 percent funded.
• Statutory funding: follows a funding level a state requires.

The choice affects what you pay each month. Our guide to why HOA fees are so high shows how catching up on underfunded reserves pushes dues up, and our guide to homeowners association dues explains how your share is calculated.

The reserve fund is money: a separate account the association holds for major repairs and replacements. The reserve study for a condo association is the plan that says how big that account should be and how fast it should grow. An association can have a large fund and no current study, or a polished study that the board never funds.

When the fund falls short of the work the study predicts, the association has three ways to pay: raise dues, levy a special assessment, or borrow. Our guide to HOA lending explains how association loans work and what they cost owners over time.

There is no federal requirement to commission a reserve study for a condo association. Some states set one by statute, others only require disclosure, and many leave it to the governing documents. Four examples, each verified against the statute:

California: Civil Code 5550 and 5565

Under Civil Code 5550, the board must have a visual inspection of the accessible areas of the major components done at least once every three years, when the current replacement value of those components is at least half the association's gross budget excluding reserves. The board must review the study every year. The study must identify major components with a remaining useful life of less than 30 years, estimate their remaining life and cost, state the total annual contribution needed, and include a reserve funding plan.

Owners see the result in the annual budget report. Civil Code 5565 requires a boldface summary showing the estimated reserves needed, the reserves actually set aside, the percentage of the first covered by the second, and the current deficiency per unit. If you are buying a condo in San Diego or elsewhere in California, ask for that summary first; it puts percent funded on one page.

Florida: the structural integrity reserve study

Florida's rules are the strictest in this group. Under Florida Statutes 718.112, every condo building three habitable stories or higher needs a structural integrity reserve study (SIRS) at least every 10 years. Associations that existed on or before July 1, 2022 had to complete one by December 31, 2025; when combined with a milestone inspection due by December 31, 2026, the study could come later, but no later than that date.

The SIRS is based on a visual inspection and must cover the roof, structure, fireproofing and fire protection, plumbing, electrical systems, waterproofing and exterior painting, windows and exterior doors, and other items over the statute's cost threshold that affect those systems. It must be performed or verified by a licensed engineer or architect, or by a credentialed reserve professional the statute recognizes, and it must recommend a baseline funding plan. For budgets adopted on or after December 31, 2024, unit owners can no longer vote to fund less than the SIRS requires. The statute does allow a temporary pause in contributions, for up to two budgets adopted on or before December 31, 2028, after a recent milestone inspection and a majority vote of the total voting interests.

For buyers comparing condos in Brickell or Sunny Isles Beach, the SIRS and the funding schedule built on it are often the clearest explanation of current dues.

Washington and Nevada

Washington's RCW 64.90.545 requires covered associations to prepare and update a reserve study, with an update every year and, at least every third year, an update by a reserve study professional based on a visual site inspection. Nevada's NRS 116.31152 requires a study at least once every five years, an annual review of whether reserves are sufficient, and, outside small communities in less populous counties, a preparer holding a state permit. That rule covers common-interest communities generally, not only condominiums, including those around Las Vegas.

Other states have their own rules or none. Check your state's condominium or common interest community act, and your declaration, which may require more than the statute.

State law sets the minimum. CAI's standards describe best practice as regular updates, with an update based on a site inspection at least every third year. Washington's statute and California's three-year inspection with annual review are close to that. Nevada's five-year cycle and Florida's ten-year SIRS cycle are floors, not targets, and nothing stops a board from updating more often.

Updates also matter for financing. In Lender Letter LL-2026-03, Fannie Mae raised the minimum reserve allocation for condo projects under full review from 10 percent to 15 percent of budgeted assessment income, for loan applications dated on or after January 4, 2027. When a lender relies on a reserve study instead, the budget must include the study's highest recommended reserve allocation, and lenders may no longer use the baseline funding method. A building that falls short can become hard to finance, as explained in our guides to the non-warrantable condo and FHA qualified condos.

The cost of a condo reserve study varies too widely for one number to mean much, so ask several qualified preparers for proposals with the same scope. The price usually moves with:

• Level of service. A Level I full study costs more than a Level III update with no site visit.
• Size and complexity. A high-rise with elevators, garages, mechanical systems and a facade has far more components than a garden-style community.
• Who must sign it. Florida's SIRS must be performed or verified by an engineer, architect or recognized reserve professional, and structural testing adds cost.
• Existing records. Good maintenance logs, past studies and drawings shorten the work.
• Travel and schedule. Remote sites and rushed deadlines cost more.

The study is cheap next to what it prevents. When a facade project shows up in the study ten years ahead, the cost can be spread across a decade of dues, whereas a surprise failure usually ends in an assessment. If your association is self-managed, our guide to condo association management covers how managers typically coordinate the study and the budget.

You do not need to check the math in a condo reserve study. You need to answer six questions:

1. How old is it, and what level? A Level III update on top of a five-year-old site visit is weaker evidence than a recent Level II.
2. What is the percent funded, and which way is it moving?
3. Which large projects fall in the next five years, and are they funded?
4. Does the budget follow the recommended contribution? Compare the study with the adopted budget; the board's vote should appear in the minutes, as covered in our HOA meeting minutes template guide.
5. What assumptions does it use for inflation and interest? Optimistic assumptions make reserves look stronger.
6. Are special assessments already approved or proposed? The estoppel certificate at closing states amounts owed; see what an estoppel is in real estate.

If you are buying partly for the return, the reserve study belongs in the math in whether buying a condo is a good investment. Then ask people who own in the building whether the board funds what the study recommends, on Ask a Resident.

A reserve study says what the board should fund, and only owners can tell you what it actually did.

• When the last reserve study came out, did the board adopt its recommended contribution or a lower one?
• Were owners given a summary of the study, or did you have to ask for it?
• Has a project in the study, such as a roof or elevator, come in much higher than the estimate?
• Has the association paid for a major repair with a special assessment or a loan in the last five years?
• How did the board explain the most recent dues increase at the budget meeting?
• Has the board ever paused or reduced reserve contributions, and how did owners vote?
• Which building system do long-time owners worry about most?