What is a Reserve Study?
A Reserve Study is a future repair and replacement plan for the common and limited common elements the Association is responsible for. The study includes information about the elements and their useful service life along with a recommended funding plan to pay for the repair or replacement of those elements when needed.
Over time, owners should be paying into the reserve fund based on the recommendations included in the reserve study. When it’s time to repair or replace the roof for example, there should be adequate money in the reserve fund without the need for a special assessment from the current owners.
Washington state law (RCW 64.34.380 or 64.90.545) requires HOAs to obtain a reserve study and update it annually, with a few exceptions. State law also dictates what must be included in the reserve study (RCW 64.34.382 or 64.90.550) and the new condo law which went into effect July 1, 2018 contains an important change to address the exclusion of something which really should be included in the reserve study.
The Condominium Act (RCW 64.34.824.2a) says “….if one of these reserve components is not included in the reserve study, the study should provide commentary explaining the basis for its exclusion.” WUCIOA (RCW 64.90.550.2a) says “If one of these reserve components is not included in the reserve study, the study must explain the basis for its exclusion.” This change will increase the Association’s obligation for disclosure and reduces the Board’s ability to exclude something from the reserve study which should be included.
For condo buyers, understanding the reserve study and the future obligations of the Association is important. For existing condo owners, following the funding plan and recommendations will help reduce the risk of special assessment and will also make the Association a more appealing option for new condo buyers.