Glossary of Terms: reserve study

a long-term capital budget planning tool, completed at least once every 3 years, identifying the current status of the reserve fund and a stable and equitable funding plan to offset ongoing deterioration, resulting in sufficient funds when those anticipated major common area expenditures actually occur

The reserve study process can be simplified as follows:

1. A reserve company retained by the board identifies all major common area components, the cost to repair/replace them, and their remaining life span.
2. The reserve company calculates how much money is needed and when.
3. The board decides how to fund the reserves--whether through increased assessment contributions, special assessments or a combination of the two.
4. The funding plan is annually disclosed to the membership in the year-end budgeting process.

(Added by Stats. 2012, Ch. 180, Sec. 2. (AB 805) Effective January 1, 2013. Operative January 1, 2014, by Sec. 3 of Ch. 180.)

CA Civ. Code § 5550

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