FAQ

Frequently asked questions

What is a reserve study?


A reserve study is a physical and financial analysis of the common area an association is required to maintain on a long-term basis. HOA's (and other common-interest developments) are required to have an on-site reserve study performed every three (3) years. Reserve studies provide specific disclosure documents which are part of a package the association is required to mail to membership annually. There are three levels of reserve studies: Level 1 is referred to as a Full Reserve Study, this includes an on-site inspection and full quantification of the reservable common area; Level 2 is an Update Reserve Study with site inspection, a Site Inspector may update component condition and cost estimates; Level 3 is a Financial Update Reserve Study and does not involve a site inspection, instead reserve expense information is accounted for, financial information updated, and fresh disclosure documents are provided.




Are we talking about HOAs?


Yes I am! Homeowners associations, condominiums, townhomes, high-rises, master-planned communities, and other terms are all types of common-interest developments. The Davis Stirling Act in the California Civil Code governs common-interest developments. The reserve sections in the Davis Stirling Act state that reserve studies must be performed for most community associations. Reserve studies are also beneficial for timeshares, resorts, schools, churches, industrial parks, and commercial developments.




Are reserve disclosure documents included with SCT reserve studies?


Every SCT reserve study includes the California Civil Code reserve disclosure documents for the annual mailling. These pages are titled 'Reserve Summary' and 'Assessment and Reserve Funding Disclosure Summary' and state their Civil Code requirement at the top of the pages. Do you have a blank line where the monthly assessment should go on the top of the Assessment and Reserve Funding Disclosure Summary page? Send us the upcoming approved budget, any changes to the reserve balance, reserve allocation, and components, and we will finalize the reserve study. We are more than happy to fill this in; however, when In a bind, one could fill in this line with the monthly dues and be ready for mailing. The annual disclosures must be send to membership 30-90 days before the fiscal year end.




Are reserve studies required? If so, how often?


Most community associations are required to have reserve studies performed, the only exception is if the current replacement value of the major components is equal to or greater than one-half of the gross budget of the association, excluding the association’s reserve account for that period. Most communities don't come close to meeting this requirement, so read on to hear the details. An on-site reserve study is required by the Davis Stirling Act every 3 years. Level 1 & Level 2 Reserve Studies satisfy this requirement. Financial updates (Level 3 Reserve Study) are recommended for the years in between so your community’s expenses are accounted for and, more importantly, provide fresh reserve disclosure documents for the membership and potential buyers. Keep in mind that reserve studies should be prepared in advance of budget conversations for the upcoming fiscal year. If an HOA has a December 31 fiscal year end, May is not too soon to request proposals and get an on-site visit scheduled.




What time of year should we (the HOA Board of Directors) have a reserve study done?


One of the most asked questions! The annual mailing must be sent to membership 30-90 days before the end of the community’s fiscal year, and the reserve disclosure documents should be included. Around 6 months prior to the end of the fiscal year is a good time for the board or community manager to start the reserve study. Here's the reserve study process: 1. Association requests reserve study bid 2. If association is new to us, we will request the most recent reserve study (or DRE Budget), an address, and a site map 3. Reserve provider sends bid. Association Board of Directors discusses and approves one reserve study provider. 4. Reserve provider is notified by community manager or board member. Reserve provider sends list of information needed to produce reserve study. 5. Community manager (or other management representation) or board member(s) provide information to reserve study provider. 6. If necessary, reserve provider reaches out with questions or concerns. Reserve study is produced and sent. Later in the year, as the fiscal year end nears, and the board is having budget conversations, find the reserve study. 7. When the budget is approved, send the upcoming budget to us, and let us know if there are any updates to the reserve balance, reserve allocation, and/or any unexpected component expenses. 8. We will finalize the reserve study and send it back, ready for your association's mailling.




What will SCT need to provide a proposal?


We will need the community's most recent reserve study, site map, an address, and the number of units (if it's not clear in the reserve study).





DOM MISHKA

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E:  mishka@dommishka.com

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