Reserve Studies

Washington State has recently passed a law, to take effect January 2012, that will require HOA's meeting certain criteria to have a reserve study completed. One of the exemptions from this requirement, however, is if the association does not have "significant assets," which is defined as: "the current replacement value of the major reserve components is seventy-five percent or more of the gross budget of the association, excluding the association's reserve fund." My question is thus: how do you know what your "significant assets" are if you've never had a reserve study? Wouldn't you need to have a reserve study to determine this "significant asset" exemption, which would defeat the purpose of the exemption in the first place? The other two exemptions are, if the reserve study costs more than five percent of the HOA's gross budget, or if there 10 or fewer houses. We don't meet those two exemptions. I have reached out to a reserve studies specialist in Seattle, but always prefer limited contact with such professionals if possible. The feedback from this forum has always proved helpful. Thanks!

Dorthy,

I did a little more research and discovered the following:

The Washington State Bill itself Helps to be able to read the exact language.

Article defining what "significant assets" are per Washington law.

Article - Reserve Accounts and Studies — New Law, Old Problem from the Washington State Homeowner and Condominium Associations web site.

Hope this also helps.

Tim

Dorthy,

Your going to be surprised at how much playground equipment costs as well.

It is possible to do the study yourself. It may or may not be as accurate as a professional study.

Don't forget things like entrance signs, as part of the study.

Good Luck.

Tim

I would expect that in time the Laws will change requiring a copy of the Reserve study to be given to new buyers as part of the Associations disclosure package.


Does that include the cost of installation?

As an FYI:

We also have a brick entrance sign and put within the study $1,000 every 10 years for a grout inspection and repair. We also put in $3,200 every 40 years for replacement of the letters. This has us setting aside $172.20 per year for the entrance sign.

For the playgrounds we went through our records and got a catalog from a vendor. Then figured made best estimates from there. Don't forget to allocate for mulching the play area. We figured every 5 years for that based on past expenses.

We did discover that vendors we used in the past were fairly helpful in helping estimate the life expectancy and suggested maintenance.

Tim

This is why I love this site. Tim, you are wonderful for providing me with your info about your brick sign. As for the street lamps, I got that info from the electrician who installs them, both privately and for the city. I never asked him about what all that entailed, nor pursued it further. But, I may be having him come out this week to check the photo cell on this group of lights in the park. I will ask him detailed questions for sure. And you are no doubt right about the Reserve Study being added to the disclosure statements. All this is good fodder to keep the homeowners at bay when they start to protest against having to do this.

Rob, thank you for your valuable assistance too. Can it be possible that all this makes me excited about doing a reserve study? Yikes! I need to go ride my bike!

Grant,

Are their web links to that information?

The link to California's Dept of Real Estates' Reserve Study Guidelines for Homeowners’ Association Budgets booklet published in August of 2010 (which is an excellent source)was provided in the other Thread on Reserve Studies. If there are more and you can provide the links it would be a great help. If you don't have the links but can provide the titles, I'll take the time to see if links are available and post them.

Tim

Tim and Graham,
I went to the California link that Tim had in his post. I bookmarked it because it'll take some time to read! I did find out we are exempt due to the cost of the Reserve Study being more than 5% of our annual budget. So I talked the guy into getting the cost just below the 5%, giving them some money and us a Reserve Study! Win-win! But I'm not ready to commit until I do ALL my research, which includes perusing that California tome. I did start to read it, but quickly started to zone out, wondering if it was too California-specific. But I'm as determined as a six-peckered goat (wait, can I say that?), so I will approach it with the awe and reference it is clearly demanding!

Rob,
Very nice. We are one of those HOA's that's leaving you gasping with incredulity over having no reserves. We just put all the dues in one checking account and pay for what we need out of that. On the other hand, we've never had any special assessments to pay for anything except when some very tall, persistent and testosterone-laden fellows campaigned for a basketball court in our park. Of course, they won -- all sports, all the time. I was one of three who did not cast an affirming vote. But I'm over it now. But, hey, now it's a component in a Reserve Study right? HA!

I think this subject has not been on the homeowner's radar (not much is in the old 'hood, unless it effects someone personally), for two reasons. The first is because folks still perceive us as a "new" development. But we are heading into our twentieth year. The second is that folks perceive our infrastructure as pretty low-maintenance, which, relatively speaking, it is. But not being a part of the day-to-day operations most folks also don't see what it is that the Board sees.

You make an excellent point that the Board members or any other volunteer called on, are not experts in all fields. But more importantly than that, the "experts" necessary for any given project in the hood more often than not aren't volunteers. One way or another you gotta pay to play if you've chosen to live in an "associative" community.

I will print off your missive and put it in my quiver as I begin this process of introducing the flock to this new and necessary consideration. Thank you for the clarity in which you presented.

Dorothy