A reserve study is a financial planning tool used by condominium associations, homeowners’ associations, and cooperatives in Florida to anticipate and prepare for the cost of the repair (deferred maintenance) and replacement (capital expenditure) of the association’s common assets
prepared by an expert (typically an engineer, architect, or a certified reserve specialist).
In general, the study includes an analysis of the property’s physical condition, review of the association’s current reserve funds, and provides a schedule of forecasted repair and replacement costs of the association’s assets over the next thirty years. Reserve studies often include components such as roofs, fireproofing and fire protection systems, structural components, plumbing, electrical systems, waterproofing and exterior painting, pavement resurfacing, windows and exterior doors, swimming pools, and elevators. The components included in the reserve study will depend on various factors including statutory requirements for condominiums and cooperatives, as well as who is responsible for maintenance of various components. For example, while a homeowners’ association does not own the individual homes, some governing documents require the association to maintain the exterior of the homes and reserve for the cost thereof.
When to update your association’s reserve study and what level of update to choose is a decision that should be made with the advice and guidance of your reserve study provider and in accordance with the applicable laws. Reserve study updates are an important and necessary tool to keep your association’s reserve funding and repair and replacement schedules current and accurate.
The Community Associations Institute’s Reserve Study Standards (July 2023) provides that reserve studies can be updated through a Level II Reserve Study (an update of a prior study with a site visit) or a Level III Reserve Study (an update of a prior study without a site visit). The Reserve Study Standards recommend that a Level II Reserve Study (an update of a prior study with a site visit) is performed at least every three years.
For residential condominiums with buildings that are three habitable stories or higher, there are specific statutes requiring each building to have a “structural integrity reserve study” reserving for items related to the structural integrity and safety of the building. Most condominiums of three stories or higher were required to have a structural integrity reserve study completed by December 31, 2025. A new structural integrity reserve study is required at least every 10 years.
In addition, Florida’s Condominium Act requires that associations update their structural integrity reserve study in certain situations. Situations in which an association would be required to update its structural integrity reserve study include:
1. If the structural integrity reserve study is performed before the association has approved a special assessment or secured a line of credit or a loan then the structural integrity reserve study must be updated to reflect the funding method selected by the association and its effect on the reserve funding schedule, including any anticipated change in the amount of regular assessments;
2. If the reserve funding from regular assessments, special assessments, lines of credit, or loans does not align with the funding plan from the most recent version of the structural integrity reserve study in which case the association must obtain an updated structural integrity reserve study before adopting its budget; and
3. If reserve fund contributions are temporarily paused for the purpose of funding repairs recommended by the milestone inspection, a structural integrity reserve study must be performed before the continuation of reserve contributions.
Florida’s Condominium Act also provides that an association may update its structural integrity reserve study to reflect any changes to the useful life of the reserve items after such items are repaired or replaced and the effect such repair or replacement will have on the reserve funding schedule.
Structural integrity reserve studies must be prepared or verified by an engineer or architect licensed in Florida or a certified reserve specialist or professional reserve analyst by the Community Associations Institute or the Association of Professional Reserve Analysts.
