Reserve Study Exemptions

I still don't like the requirement for a reserve study,this seems like a special interest group trying to put more regulations on Condo's and HOA's. I research the House Bill passed by WA. state that enacted the law and found some exemptions to this requirement.(1) If it creates a hardship on the HOA(?) (2)the HOA does not have "significant assets"(the current replacement value of the major reserve components is 75% or more -50% for condo's- of the GROSS BUDGET of the association, excluding the association's reserve account funds). (3) there are ten or fewer homes in the association. As you can see these special interest groups didn't leave much wiggle room but it's a start. I'am sure most other states have some exemptions in their laws(state bills) somewhere-maybe this will help some of you. All we have are 2 gazebo's, 3 wood playground structures and a small bb court(county roads,sidewalks). Our sprinkler system is under yearly contract(landscapper's) and our gate gets service every year, from the articles I have read these are not reserve items since they get maintain every year but the Board,upon reliance of the MC, is going ahead with the study anyway - stay tuned folks there is a storm coming.

Duane,

The Reserve Study can be done on your own. It might not be as accurate but it can be a start and will likely satisfy the requirement to have one done.
See this thread for more info.

The Reserves would pay for replacement of the gazebos, playground equipment, basket ball goals, entrance gate (even with maintenance, it will need replaced at some point in the future) and perhaps the valves/heads of the sprinkler system.

The Reserves should also pay for the planned maintenance of the gazebos (roofs, power washing/sealing, etc.) and the playground structures (power washing/sealing, mulching of the area, etc.).

The choice is to put a little away now so the money is available later or to use special assessments or delay the maintenance/replacement of the items until funds are available.

Most of the laws I've seen have only required the study to be done but it was up to the membership to decide if the Reserves were fully funded or not. With lenders looking at the financial health of Associations as part of the decision to grant the loan or not, those Associations with fully funded Reserves may have fewer issues in potential buyers qualifying for loans.

I don't know if this bill is new and not yet signed into law or the one that was signed into law and became effective on January 1, 2012.

Here is a link to an article about the changes for the one that became effective January 1, 2012:

WA Reserve Account Law – What’s Changed? Written in 2011.

Here is a link to the Bill discussed in the article (a pdf document):
ENGROSSED SUBSTITUTE HOUSE BILL 1309

Duane, is this the Bill you are talking about?

I also found this article:

http://www.wahoalaw.com/2011/05/12/reserve-accounts-and-studies-new-law-old-problem/#more-158

A couple of excerpts read:

“Washington State Governor Christine Gregoire signed into law new legislation concerning owner associations and reserve studies. The law becomes effective January 1, 2012.”

“The reserve study legislation has been championed by associations and owners who believe it’s time to stop inebriated ostrich financial planning.”

“Under this 2011 legislation, effective January 1, 2012, all residential condominium and homeowner association boards will be required to provide unit owners detailed information regarding current and future projected reserve account funding, reserve-related assessments, and contribution rates for fully funded plan.”

“Residential owners in owner associations will have the right to receive annual disclosures about the short and long-term financial health of the association, about whether there’s enough money to maintain the property in the near future, about whether there’s projected to be enough money down the road to maintain the property,”

“Here’s what the legislation doesn’t do. Whether or not you believe it’s fair that owners should be required to pay for infrastructure as they “use it up”, there is still no mandatory requirement for funding reserve accounts.”

One of the purposes in conducting a reserve study is to estimate repair costs for capital items which need repair or restoration. You need to know how much to save in order to have enough money in the kitty to cover these costs. It will avoid borrowing money or special assessments to cover these costs. Not to have a reserve study is very short-sighted especially if your development has many amenities. JMI