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By CondoAssociation.com • April 30, 2018

Can we Reserve for components more than 30 yrs into the future in our Reserve Study?

Can you? Yes. Should you? Yes. National Reserve Study Standards (NRSS) define a component as any project that meets the following four-part test:

  1. that it be a common area maintenance responsibility,
  2. that it be life limited,
  3. that it have a predictable remaining useful life,
  4. and that it be above a minimum threshold cost.

As you can see, there clearly is no restriction on Useful Life (minimum or maximum). Many states and some Governing Documents require that Reserves be set aside for components within a certain number of years from the present (20 or 30 years). But those are minimum consumer protection requirements, not limitations or restrictions from planning for significant projects further into the future.

Thus major assets the association is responsible to maintain such as (approx) 25-yr Useful Life roof projects, 30-yr Useful Life repiping projects, 35-yr Useful Life elevator modernizations, and perhaps even 50-yr Useful Life retaining wall or seawall repair projects, as soon as the timing and cost can be reasonably identified, should all appear in your Reserve Component List. The sooner they are identified, the more years the association will have to spread out this major expense and minimize the cost to the homeowners. In addition, the sooner these projects appear in the Reserve Study the fairer it will be for all owners, since all owners enjoying the use of that asset (or the boost that asset gives to their property values simply by being in existence) will be slowly and surely paying for that asset’s ongoing cost of deterioration.

And that’s the bottom line, helping the board fulfill their responsibility to care for the assets of the association. If deterioration can be reasonably identified, a plan to offset that deterioration by collecting Reserves to offset that ongoing deterioration should be in place. If a major component’s deterioration can be reasonably identified, even if “in the distant future”, it should be funded through Reserves.

Interested in a free Reserve Study proposal for your association? Join the thousands of associations each year, in all 50 states, who enjoy on the assistance of Association to avoid surprises and keep their Reserves “on track”. 

By Robert M. Nordlund, PE, RS
Association Reserves, Inc.
www.ReserveStudy.com
RNordlund@ReserveStudy.com

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Please note that blog comments and postings are not legal advice, rather only the opinions of our readers.
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