How do you read an HOA reserve study?
By OurHOA · General information · Revised
Read the component list, project dates, cash forecast, and contribution assumptions together. A reserve percentage alone cannot tell you whether the next repair is funded.
Establish what report you have
Check the report date, property covered, study provider, and whether this version included a site visit. Ask for the latest update and adopted funding plan. Keep a separate list of changes since the report: completed work, new damage, revised bids, and actual contributions. Those changes may explain why today’s account balance differs from the projection.
Follow one near-term project through the report
Choose a roof, road, or other substantial project expected soon. Find its estimated cost and timing in the component list, then locate the corresponding expenditure in the cash forecast. Ask whether the scope includes the work the board now expects to commission. A missing project or an unexplained cost difference is more useful to investigate than a reassuring summary label.
Read percent funded as a comparison
CAI defines percent funded by comparing the reserve balance with the fully funded balance, which reflects component age and current costs. It is not the percentage of every future bill already paid. Ask which balance date and component assumptions produced the figure, then check when cash is actually needed. Do not treat a percentage as a guarantee against a special assessment.
Compare the proposed funding with actual decisions
Find the annual contribution used in the forecast and compare it with the adopted budget and transfers recorded so far. Identify assumed increases, special assessments, borrowing, and investment income. Ask the preparer to show the effect of a delayed contribution or an earlier repair. Record which assumptions the board has approved and which remain proposals.
Check the report’s limits
A reserve study is not a structural safety certification or an audit of the bank balance. Obtain the relevant inspection or accounting records for those questions. California section 5550 has a three-year visual-inspection cycle when its component-value threshold is met, plus annual review; this is a jurisdiction-specific requirement, not a national schedule. Ask the board to identify the requirements applicable to your property.
Sources
These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.