17d (edited) • General discussion
Your Condo's Reserve Study Might Be Lying to You
Many Massachusetts trustees assume they're in good shape because they have a reserve study.
The problem? A reserve study is only accurate on the day it's completed.
A study that showed your association was 70% funded five years ago may be significantly outdated today.
Here's why:
Construction costs changed.
A roof projected to cost $80,000 may cost $115,000 or more today.
Massachusetts weather is tough on buildings.
Freeze-thaw cycles, ice dams, and coastal conditions can shorten the life of major components.
Lender expectations are changing.
Fannie Mae and Freddie Mac continue to place greater emphasis on reserve funding and long-term capital planning.
Massachusetts doesn't require a reserve study, but Chapter 183A requires associations to maintain an "adequate replacement reserve fund."
The challenge is that "adequate" isn't defined by your reserve balance alone. It's measured against the actual cost of replacing the components your association is responsible for maintaining.
Quick Reserve Health Check
- When was your last reserve study completed?
- What is your current percent funded?
- What percentage of your annual budget is contributed to reserves?
- Could your association replace its largest component at today's pricing?
When was your last reserve study, and does your board know its current percent-funded number?
Most trustees know their reserve balance.
Far fewer know whether it's enough.
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Your Condo's Reserve Study Might Be Lying to You
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