caculating reserves

Does your state law require associations to have a certain amount of reserve funds? Do your documents require that a reserve fund be maintained, and if so, does it specify that a reserve study needs to be done?

Our association just contracted for a reserve study, but it's not required by our state or documents. None of us have any idea how to compute useful life left on concrete or shingles or brick facing or anything. A reserve study is what we need because we're clueless. If you have knowledgeable people, and it's not required for you, maybe you don't need a reserve study.

LeoS1 - Your association is 15 years into the aging of the common elements. Without monthly reserve allocations that will adequately fund for the replacement of those elements, how in god's name do you expect your investment to be maintained and protected? The amounts necessary to replace aren't supposed to make you feel comfortable, especially if those amounts weren't anticipated years ago. Sounds like your association is behind the eight ball on this one. A reserve study is necessary for cost of replacement of elements in excess of $10,000.00 the purpose is to objectively assess and prepare the association for the inevitable. However, even for costs less equal to or less than $10,000.00 common sense dictates the amount is necessary to be funded from some maintenance account.

http://www.reservestudy.com/q22.html

In Florida every condominium association must present the unit owners with a schedule of “fully funded” reserves for roof replacement, building repainting, pavement resurfacing, and any other component of the condominium property with a replacement cost in excess of $10,000.00 (typical examples would include swimming pools, tennis courts, fencing, common area decorations, and elevators). Unless the members have voted to reduce or waive the funding of reserves, the Board has no discretion and must include fully funded reserves in the adopted annual budget. If reserves are to be waived, a vote of the unit owners must be taken, with majority approval required. The notice for the members’ meeting must include a fully funded reserve schedule, and if a waiver or reduction vote is contemplated, should also include the Board’s recommendation as to what the owners are voting on in terms of reduced reserves. Under a recent change to the law, reserve funds may be presented either on a “straight line” or “cash flow” method of funding reserves, although a unit owner vote is required to convert existing reserve funds from “straight line” to “cash flow.”

In addition to state law requirements or your governing document requirements, you may also want to consider the mortgage underwriting requirements. New Fannie Mae guidelines require at least 10% of your budget to go to replacement reserves. As a result, 10% is the floor regardless of what the reserve study states or what funding formula method is used -- unless of course perspective buyers don't need a mortgage.