Setting the scope of the reserve study is one of the most overlooked aspects of the process, and is one of the primary reasons that Associations may be dissatisfied with the end product that they receive. This article explores the reasons why you choose to have a reserve study, and how that affects its scope. Scope of the study also affects the cost you will pay.
There are several different reasons why an association may decide to have a reserve study performed. In states like California, Nevada, and Utah (amongst others), state statutes may drive your decision to have a one. If that is the case, then cost of the study is likely to be your most important criteria in selecting a company to perform it.
Other associations want a reserve study to help them determine the appropriate assessment amount for reserves. This typically means the association has a higher level of interest than just complying with a statute. If that is the case, then cost may not be the most important criteria in making your selection of a company to perform the study – although cost is always important.
Finally, a much smaller group of associations has embraced the concept of using the reserve study report as a management tool to help them better manage long-term replacement costs. For this group, the most important criteria in selecting a company is making sure that the final report produces component information at the appropriate level of detail.
Theoretically, while reserve studies created for any of the three goals described above may produce overall budget information that is very similar, the first two will generally not provide sufficient information to allow it to truly be used as a management tool. An example is a study we completed recently for a large master association. Several areas stood out as examples of the difference in varying approaches. The prior reserve study contained single line items only for several key components: roads, HVAC equipment, fitness equipment, and playground equipment.