CAPITAL RESERVE STUDIES

A Capital Reserve Study is a variation of the PNA. In a Capital Reserve Study, an engineer evaluates the current condition, remaining useful life of the covered building components, maintenance requirements, and estimated cost of maintenance and repair. However, an additional calculation is made to determine how much money must be set aside, on a regular basis, to fund repairs when required. In other words, how much capital, or money, should an association reserve, or put aside, to maintain itself over a period of years. Typically, a twenty-year time frame is used, although it can be shorter or longer. There are generally two types of reserves maintained by associations.

Contingency, or Maintenance, Reserves are intended to be used for operating expenses during a twelve-month period (e.g. utility costs, sewer cleanouts, pest control, etc.). Capital Reserves are for project repairs and replacements. Items such as regular periodic repairs (e.g. painting), irregular periodic repairs (e.g. deck surfacing), foreseeable failure, catastrophic failure, and outdated design/aesthetics may be included in a Capital Reserve Budget.