Reserve Fund Studies are recommended as Best Practices for HOA and Community Associations. These studies list the association-owned and maintained property and assign an expected useful life and a probable cost to replace. These studies can also break down how much money an association needs to set aside on a yearly basis so that large replacements of key components are planned and funded. A good reserve fund study will identify risks and help manage costs by avoiding deferred maintenance and special assessments.
For the past few years, the Maryland General Assembly has worked to adopt a requirement of reserve studies every 5 years with an additional measure to require associations to fund the reserve per the study. As of October 2021, the law requires studies in Montgomery and Prince George’s counties. It is expected that this issue will go back to the assembly in Spring 2022 and be passed for all of Maryland.
The collapse of the 12-story Champlain Tower South Condominium in Surfside, Florida is the catalyst to push this measure through to law. For now, the standards in the Maryland statute can provide guidance to associations throughout the state which do not yet have mandatory reserve study and funding requirements.
Delaware requires a reserve study and appropriate funding for residential condominiums.
The cause of the collapse in Florida is still being investigated, and a reserve study may be the first of many mandated changes associations will face, including updates to building codes, and engineer recertifications over time.
We’ll bring you more information when the General Assembly convenes next spring. For more information on reserve requirements, visit https://bit.ly/21reserve.