Beyond the Binder: 3 Critical Mistakes HOAs Make with Their Reserve Study
Commissioning a professional reserve study is a fundamental step toward responsible governance for any community association. However, the true value of the study isn't in the document itself, but in how it's used. Too often, a comprehensive study ends up as a binder on a shelf, its recommendations ignored until a crisis hits.
A reserve study is a living document, a roadmap that requires ongoing attention. Here are three of the most common—and costly—mistakes boards make after receiving their report.
Mistake #1: Treating the Study as a One-and-Done Report
A reserve study is a snapshot in time. It's based on the condition of your assets and market costs at that specific moment. But components age, inflation occurs, and unexpected projects arise.
The Fix: Treat the study as the beginning of an ongoing process. California law—and industry best practice—requires boards to review their study annually and conduct a full on-site update every three years. This ensures your financial plan adapts to the changing reality of your property, preventing your roadmap from becoming outdated.
Mistake #2: Deviating from the Funding Plan Without Cause
It can be tempting to use reserve funds for unbudgeted operational expenses or to lower contributions to keep monthly dues down. This effectively dismantles the carefully constructed financial plan and puts the community right back on the path to a special assessment.
The Fix: The reserve funding plan is your board's primary guide for long-term financial health. It should be adhered to rigorously. Any deviation should be a conscious, strategic decision based on new information or professional advice, not a short-term fix for a budget shortfall.
Mistake #3: Poor Communication with Homeowners
One of the biggest hurdles to implementing a funding plan is homeowner pushback on dues increases. This resistance often stems from a lack of understanding. When owners don't know what the reserve fund is for or the condition of the property, any increase can feel arbitrary.
The Fix: Use the reserve study as a tool for transparency and education. Proactively share the annual summary with all members. Frame the reserve contributions not as a cost, but as a shared investment in protecting and enhancing their property values. When homeowners understand the "why," they are far more likely to support the "how."
Make Your Reserve Study a Powerful Tool
Avoiding these common mistakes transforms your reserve study from a simple report into a powerful, dynamic tool for strategic governance. It's the key to maintaining a physically sound and financially stable community for years to come.
Need help implementing your reserve study or understanding how to best communicate its findings? Contact Apex Reserve Group for a complimentary 30-minute consultation. We're here to be your long-term partner.