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How Much Money Should There Be In Our Condo Reserve?

Posted on Wed, Feb 11, 2009 @ 06:44 PM

A typical question I am asked is “what is required to be in a condo reserve"?  Well according to the condo association law it would be what is “adequate”. No offense to the real estate lawyers out there but that seems a bit vague. Rightfully so.

There is not way to come up with a one system fits all formula. My opinion would be the more money in condo reserves the better. Condo Associations should budget each month to put money from condo fees aside for the future replacement of common areas and facilities. How much is determined by the size of the property and the amount of condo association common areas that will need attention down the road.

The best way to determine this is to have a reserve study specialist or engineer provide you with a reserve study. This reserve study will determine the expected lives of your HOA or condo association common area facilities. The heating system, the roof, the siding, the chimney, light fixtures, interior painting, etc. It will then apply future costs to each element and determine what needs to be put aside each year to meet these goals for you condo association.

For smaller condo associations this can be cost prohibitive. Trustees or condo boards could develop their own version of a condo reserve study by obtaining pricing on the larger association common area elements and adding a lifespan to them. I have seen many Condo Board designed plans that have been very complete and accurate.

If the condo association is professionally managed, your property manager could assist the condo board in developing this type of reserve study with the condo association board. Be prepared to pay an additional fee to the property management company for this type of work since it is outside the scope of most contracts.

Get to know who lives at in the condo association or HOA. This is important on many levels and could come in handy to do a self designed condo reserve study, HOA reserve study or other types of projects. You may have an engineer, architect, contractor, lawyer, accountant or one of many other professions that do not have time to be a condo association board member but are very willing to be involved on a condo management committee.

How much should you have in condo reserve? You have enough money in a condo reserve if you can address a condo association common area or facility issue without having to implement a special assessment. That would be my definition of adequate.

In my state of Massachusetts, a Condo Association Replacement Reserve Fund is a separate and segregated portion of the common condo reserve funds or the organization of condo unit owners which shall be used to replace, restore, or rebuild common areas and facilities. 

In Section 10 (i) it states that "All Condominiums shall be required to maintain an adequate replacement reserve fund....." Section 10 (m) it allows on an annual basis for sixty seven percent (67%) in beneficial interest or more, may modify this provision. 

If your condo association does not have enough in condo reserve for projects, consider an HOA Loan or Condo Association Loan.

Scott D. Wolf, PCAM
Greater Boston Properties, Inc.

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Reserves are No mystery to develop one is easy.
You do need someone experienced in the maintenance of Buildings and property after that it is all down hill.
Select the amount of an item you want to build a reserve for say 10,000, any item 10000 or more will be placed on the reserve schedule.
Estimate the life span remaining vs the useful life
say asphalt lot
useful life 20 years, cost to replace projected 20 years from now $100,000
present life used 10 years
you should have 50, 000 in reserves and the balance divided by 10 or $5000 per year for the next 10 years.
Your reserves should be updated every two years.
Simple, you do not need expensive engineers charging you thousands of dollars a day, or reserve specialists that will charge you ten of thousands to conduct a reserve budget.
This is no secret , it is useful life ( life span from new) vs used life span and the balance remaining
Any association wanting a base model please feel free to contact us at our site. Please provide a name and number along with your e-mail

posted @ Wednesday, March 26, 2008 11:24 AM by Admin

Please send along a model for calculating reserves for condo association. We have a 54 unit located with 4 buildings.

posted @ Monday, April 07, 2008 5:49 PM by John Mele

Please contact us at
info@condospecialties.com and we will forward you a copy by e-mail.
If local we can call, to assit you and fax the model you we are in SE Florida
you may also go towww.condospecialties.info and review the resources it is a free site

posted @ Tuesday, May 27, 2008 3:56 PM by Paula

I just happen to be in need of a Reserve Study Analysis know-how. Would you be kind to send along a model? I checked condospecialties.com but could not find a model there. You assistance will be greatly appreciated. Thanks

posted @ Tuesday, June 03, 2008 2:23 PM by KB

Please contact us and we will send you a general format
If you provide your phone number and location we will not only send the reserve outline but call you if you wish and offer some additional information in regards to your needs based on location and other factors

posted @ Wednesday, June 04, 2008 3:30 PM by Paula Maffeo

Please send a model for calculating reserves for a condo association. We have 127 units. Thanks

posted @ Tuesday, June 10, 2008 4:49 PM by Charles Steidinger

We are trying to establish a budget for our condos in Western PA. Currently we have ten buildings containing 40 units with a potential of 88 units in the next thre years. The owners are responsible for all repairs from the drywall in. We would like to establish a condo fee and a long term budget and reserve.
Thanks for your help.

posted @ Saturday, June 14, 2008 12:05 PM by Dennis Gaggii

PLEASE we have received dozens of requests for a reserve study outline.
Responding from this site provides a NOreply e-mail address.
If you want us to reply to your request please provide YOUR email address within the e-mail you send us so we can respond to you.
We will not post it on our site as we are a company and this is part of how we make our living.
For those small communities or communities that cannot afford our services we will send you a factual outline FREE of charge or obligation
Thank you

posted @ Saturday, June 14, 2008 9:03 PM by Paula

Please NOTE an operating budget and a
reserve budget are two different things.
We can do an operating budget for you or we can do a reserve budget for you and yes we do charge for our services.
However we do have a free reserve study for smaller communities or those that cannot afford our services at no cost or obligation.
But please we cannot provide any community details on an operating budget without complete details.
Any association requesting a reserve study guide e-mails us with your e-mail included so we can respond.
We do travel nation wide,Canada and the Caribbean to assist associations.
Please read above and then respond with your questions we will attempt to answer or respond accordingly.
Thank you

posted @ Saturday, June 14, 2008 9:13 PM by Paula

Dear Mr. Charles Steidinger
We do not have your e-mail, there is no link to you here How do we contact you?

posted @ Saturday, June 14, 2008 9:15 PM by Paula

We are concerned about reserve. We have a good idea on operating expenses but at this time we need to know how to project costs. We know what current (2008)replacement cost are. Right now after 3 years we are spending 75% of our condo fee on operational costs and putting 25% in reserve.

posted @ Saturday, June 14, 2008 9:36 PM by Dennis G.

Dear Dennis
You did not place your e-mail in your response.
Please forward to info@condospecialties.com
So we may forward the study guide.
Not knowing your equipment, when you were built, type of community and the actual age, I can only provide the reserve study guide.

posted @ Sunday, June 15, 2008 8:42 AM by Paula

Please answer my posts to dagaggini@zoominternet.net
Dennis G.

posted @ Sunday, June 15, 2008 12:38 PM by dennis G

To All
We have received dozens of requests for the reserve study. Please provide your e-mail address in your request.
Responding from this site sends us a NOREPLY @ address.
Thank you.
We would like to answer all of you but cannot if we do not have an address or at lease a phone number, we do not give out or sell any information in regards to your requests.

posted @ Wednesday, June 18, 2008 7:23 AM by Paula

Some of you have requested the reserve study guide and feel it is too complicated, please look at the first posting here
"Posted @ Wednesday, March 26, 2008 11:24 AM by Admin"
This is the easy way.
It is not complicated we are working on a fill in the blanks form to assist in developing a basic reserve budget.
Thank you all for your e-mails Paula

posted @ Wednesday, June 18, 2008 7:28 AM by Paula

If two people own one unit each in a two-unit condo association in MA and have different percentages and decide to build a two-car garage, each unit getting one space, must they pay for the garage according to their ownership percentages, or can they agree to split all costs associated with the garage evenly, since their use of the garage will be 50/50?

posted @ Wednesday, June 25, 2008 2:14 PM by Logan

We have 80 townhouses and the owners are about to take over the HOA from the developers. We would very much appreciate a model. Thanks.

posted @ Monday, July 07, 2008 3:45 PM by John Wilson

Dear Mr. Wilson 
We cannot contact you with a noreply@ address. 
Please forward your e-mail and advise us of the age of the community, location near water or ocean etc.. 
the more you provide the more we can assist. 
There is no charge for the study or addition comments. 
Thank you 

posted @ Monday, July 07, 2008 4:26 PM by Paula

We found some good articles on reserve studies at: http://www.neighborhoodlink.com/article/Association/

posted @ Sunday, August 17, 2008 1:39 PM by Bill Wyman

What do you think if finacing for repaires would include combination of reserve fund and special assessments? Would you recommend a ratio?  

posted @ Monday, December 01, 2008 4:24 PM by Vladimir

I cannot comment on your request as I do not know what state your in, however I do not believe it is legal to assess for reserves., Unless you have the 65% rule. 
You may assess for repairs but you have to build your reserves. 
We have the condo statutes listed for the US, Canada, and costa rica 
I suggest you review them, before you get yourself (the Board) in trouble.Please review your state statutes atwww.condospecialties.info 
For those of you seeking a reserve study you may also go to the same site, we have received so many requests that we have placed it on our site, for specific questions contact us . 

posted @ Monday, December 01, 2008 5:41 PM by Admin

The links mentioned above are dead. Where can the "Building Bible" be obtained?

posted @ Friday, May 01, 2009 1:50 PM by W.O.

This information this guy is offering is as useless as the posting itself. To put together a RS using this clowns advise is like performing cataract surgery on your self. Just take a laser and point it in your eye and squeeze. Give me a break. It is this type of advise that has the condo industry in the situation it is in. Do the right thing, hire a professional.

posted @ Sunday, August 23, 2009 1:57 PM by Larry

Please send your reserve study model. We are a 200+ high rise in NE Florida but because of a hastily departed developer we are just barely holding on. R4ply to popculp@aol.com

posted @ Friday, October 16, 2009 12:22 PM by Charles Culp

A proper reserve budget requires more than the number of units or appoximate age to complete correctly. The best course of action is to have the property evaluated fully. This is a process that does not need to be expensive but needs to be done accurately. Undefined common area and property costs can lead to extra fees or special assessments for the condo owners.  
LM Consultants provides full reserve studies and can also perform update studies when needed. If we can help in providing a clear reserve budget and remove some of the anxiety or concern over properly allocating those funds, please let us know.  
Brian Wielgus 

posted @ Monday, November 09, 2009 1:40 PM by Brian Wielgus

I've spent my last 23 years answering this question. There is an easy way to measure the size of the Reserve Fund, and it is called Percent Funded. It has been part of National Reserve Study Standards since 1998.  
How much to contribute? Typically 15-40% of an association's income. To find out how much is right for your association is a tougher question. You could engage the services of a professional, or beginning this summer you can do it yourself, online, for free. See <a>www.QuickReserves.com<a>. We've ported our own tools to the Internet and added a few "wizards" so the 95% of associations out there who don't hire a professional will have a good tool to use.  
It's remarkable, actually. Should make problems like this one go away.

posted @ Tuesday, May 25, 2010 8:23 AM by Robert M. Nordlund, P.E., R.S.

If you need a sample reserve study or a reserve study please feel free to contact us, we are located in SE Florida but service the state as well as nationally. There is NO charge for the sample and study  
contact us at info@condospecialties.com

posted @ Sunday, July 18, 2010 9:31 AM by Admin

We have been relying on an owner who is an engineer and a second owner who has 30 yrs experience in construction of office buildings in a major city. Until now, their advice has been fine, but as the building ages things get complicated. We will be hiring an firm of engineers specializing in Reserve Studies. Our maintenance budget is about 2.5MM and our present reserves are a little over $1MM. It would seem adequate, but there are many things to be replaced in the next five years. Pavers,A/C, pooland everything that goes with it, tennis courts, office technical equipment, certain windows, fire alarm (a huge cost), pavers and waterproofing, cooling towers, hallway carpeting, painting, concrete restoration.///

posted @ Thursday, August 19, 2010 9:16 PM by Michael e Katz

Mr. Katz, our firm specializes in Replacement Reserve Studies and Condition Assessments. To answer your question, there is no set percentage that can be applied. Each association is unique and we work with each one to meet their needs. If you would like a proposal for a RRS, please email me at tracy@bluerayengineering.com. I will just need some general information about the property.  
Thanks and we hope we can help you with this importantant issue.

posted @ Thursday, August 19, 2010 10:30 PM by Tracy Rheaume

Mr Katz: 
We have examples of reserve studies, Unlike the comments by "Larry" our examples are Florida state approved, if you are in Florida we may be able to assist., if not we would be happy to provide a couple of examples. NO Charge

posted @ Friday, August 20, 2010 6:46 AM by Paula

While this article has good intentions, it is somewhat misinformed. It is a good point to see who lives in your community and might be willing to help. However, many communities are not going to have someone acclimated to building construction and its current costs. This article says reserve studies may be cost prohibitive for small communities, which is not the case. If a community is not properly managed and budgeted, it will have future problems. This is where a reserve study comes in. Reserve studies are a bargain if they save you from a special assessment or potential funding problems. If you are looking for a reserve study in Florida, I can probably help.

posted @ Friday, December 10, 2010 7:46 PM by Steven Swartz, RS

Please send along a model for calculating reserves for condo association. We have 6 units located within 1 building. Thank you

posted @ Thursday, January 20, 2011 2:36 PM by Jenny

Just as a reminder to all, we posted a very powerful Reserve Study management tool to the Internet. The site iswww.QuickReserves.com. It can create a Reserve Study for an association without one, and it can upload prior Reserve Studies and with the built-in wizards can easily update those prior Reserve Studies. It is free! 
If you want the help of a professional, great. But if not, QuickReserves.com eliminates any more spreadsheet Reserve Studies, and any more purchasing of Reserve Study software.  
Brought to you free by Association Reserves and other sponsor firms.

posted @ Friday, January 21, 2011 12:56 AM by Robert M. Nordlund, P.E., R.S.

Our pricing is very competetive. Also, with us you can feel confident knowing that we are a licensed and well recognized company. We have P.E. on staff that will oversee and sign off on our reports. Please feel free to email us for more information.

posted @ Saturday, January 22, 2011 12:29 AM by Blue Ray Engineering

I would like to receive a reserve study guide for our condos. We have 51 units in 10 buildings. We are located in Richland, WA. I'd appreciate your assistance. Thank you. Tracy Giles, mgiles@in-tch.com

posted @ Wednesday, February 02, 2011 1:07 PM by Tracy Giles

?How Much Money Should There Be In Our Condo Reserve? 
. . . I believe there is a formular for that; based upon longegevity projections for the item(s). . . 
Plus- - In my opinion: enough money should be set aside for emergencies or weather hazards "in an amount of the Insurance 'deductable')". Many condos, HOAs, etc., have come up short & not been able to make an insurance claim because they didn't have the amount of money needed to cover their deductable.  
. . . Anything else of an emergency nature can be handled by a Special Assessment. . .

posted @ Thursday, February 17, 2011 11:22 AM by KELLI2L

National Reserve Study Standards dictate that components funded through Reserves meet the following four part test: 
1) be a common area maintenance responsibility 
2) be life limited 
3) have a predictable remaining useful life, and 
4) be above a threshold cost of significance. 
Guesses and contingencies (covering insurance deductibles) therefore are generally inappropriate to be funded through Reserves.  
Following National Reserve Study Standards is always a safe bet.

posted @ Thursday, February 17, 2011 12:14 PM by Robert M. Nordlund, P.E., R.S.

How many years out can an HOA hold your monies for future repairs ... e.g. roof replacement, in a "reserve" account? What percent of the budget is allowable in a "reserve" account? I am in the state of NC. If a mortgage company can only hold your monies for a year in advance, it seems that charging a homeowner 15 yrs in advance for roof replacement is a bit much! I have read the CCR's and cannot determine the answer. We just replaced the roof on this duplex style townhouse at a cost of $4800 cost which the HOA refunded $2000 which was held in reserve.

posted @ Sunday, February 27, 2011 8:56 PM by S. Shafer

Reserve contributions are not being held for a future expense. Reserve contributions are designed to offset (pay for) current, daily deterioration over the time you own the home.  
If done accurately, that cash collected from owners who enjoyed the asset while it existed will pay for replacement when needed.  
Note that 15% - 40% of total budgeted income is a "typical" range for Reserve contributions.  
The size of the Reserve Fund itself varies over the years. It grows in the years before a large expense (ie: a roof) and it falls in the year after a large expense.

posted @ Monday, February 28, 2011 8:39 AM by Robert M. Nordlund, P.E., R.S.

Thank you for the reply, however, I still need to know what the law might state. Where can I find that law. The HOA is raising our dues each yr by an amt that they say will cover the roofing in 15 yrs. They are actually stating the long term maintainance reserve is for that purpose. This seems more like a special assessment that should require Home Owners approval down the road .. but I don't know where to find state laws re. same .... There has to a time limit when any Board of Directors can hold your money.

posted @ Monday, February 28, 2011 9:58 AM by S Shafer

It sounds like you need more than you can get from an online blog. You can contact our office, another credentialed Reserve Study provider, or a local community association attorney. If you don't know who to call, email me and we can make some good local referrals referrals.  
I continue to believe you are mis-characterizing the situation. Deterioration is ongoing. The association is not taking your money away and holding it for a future point in time. You are paying for the deterioration that is occurring every day you own your home in that association.  
Due to imperfections in Reserve planning, some homeowners pay less than the deterioration that occurred while they owned, some pay more. Such imperfection is not surprising. Usually boards under-estimate their Reserve needs, thus special assessments are common.

posted @ Monday, February 28, 2011 11:20 AM by Robert M. Nordlund, P.E., R.S.

The reserves accounts is a percentage of the replacement cost ove the life time of the component 
IE A roof may have a 15 year life span at a replacement cost of 15000 dollars so the assocaition would have to place 1000 dollars per year for 15 years, some times the roof may fail early for what ever reason, and very few uphold the maintenance warrant clause. so the homeowners must make up the underfunded amount. 
IF your seeking the law look in your own Documents or look in the state statutes for your state 
or go to condospecialties .info and look under your state 
Hope this helps 
Also 45% of the annual budget is incorrect my community has a 4.2 million budget and I am supposed to put how much in reserves, not real generally each community is different, and there is NO fixed formula, and can never be. 
to many variances in communities. 

posted @ Thursday, March 03, 2011 11:40 AM by Paula Harvey

I am on the BOD at an 88 unit association in NH, built in the 1980's. There wasn't much maintenance done prior and now are in the position of basically everything needing repair. My question is what the standard ratio is to have as operating cash and what should be in reserves? I feel it's too low. Our current fees are $230/mo and have about $5k in cash and $50k in reserves (with a CD of about $40k).

posted @ Wednesday, January 11, 2012 4:34 PM by Kristin

Only if we have nothing to fear

posted @ Sunday, April 22, 2012 10:19 PM by Coach Diaper Bag Outlet

can anyone tell me if it is illegal for the condo association board members who run our place, with no attorney or management company, can go up on our condo fees when we have $5000 in a CD, $92,000 in the reserve, and $42,000 in the bank and we are only 8 year old complex. And tell us we were under budget this year!! take some money out of the reserve for the budget!! Then they give gift certificates to board members, give gifts to new owners who buy here etc. With our monies! They have more misc. Items on our budget list they give us with no explanation and make up things when we ask what they were for and no explanation is given to anyone. We are a 37 unit  
community. WE have alot of money here for 8 years and we are responsible for our own roofs, driveways, irrigation systems, gutters etc. We only get plowing, and mowing that's it. this board has ALL it's friends locked in on the board and NO ONE is allowed in. They get people they quit and they ask their friends no one else can get on. It has been like this for 8 years. They have 1/2 the community they pay cards with and the" other half is out in the dark and they are absolutely nice people and the better half!" We have caught them in lies, cruel behavior towards others etc and some just don't cate or want to get involved. their toxic per so alities run this place and we spent $345,000 for our home and not easy to sell at this time in our housing economy crunch. Are they breaking any laws using our monies outside condo bills? If they choose to give a gift certificate take a collection , but not out of our reserve or budget account we all paid into. What is the legal issues here. It's bad enough they have $42,000 I. The stock market seversl of us asked to have taken out that we don't agree our money should be gambled away in stock markets. the board members have their other friends on a finance committee and they run the stocks and more less tell the board what to do. Is this legal for our monies in the stock market? And if the market crashes again, who puts that money back? SEveral complained about the stock market NOT used, but they refuse to take it out. HELP PLEASE with some legal answers for all of us. We loose this money we are NOT getting accessed or putting in another penny

posted @ Tuesday, June 11, 2013 3:56 PM by B&l

Man, this is a really good question right here. It is hard to give hard money figures. Let me now if you get a solid number! 

posted @ Friday, January 31, 2014 1:46 PM by Simon Adair

Financing options are a good choice for those who need more money. Check your financial longevity first. Then you can find ways to cut these costs. 

posted @ Wednesday, May 21, 2014 8:29 PM by Elias Rufus

The finances of my condominium need to be reviewed by a CPA. What documents should I request?

posted @ Wednesday, September 24, 2014 5:42 PM by Linda Putz

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