Reserve Studies - The Complete Guide is 436 pages explaining the concepts and process for making a reserve study. For more information and to order, click here.

 

 

Facilities Advisors, Inc.

File Share

Sharefile image

Upload files here

 

 

 

 

 

 

 

 

 

--

 

 

 

 

State of Ohio


State of Ohio statute 5311.081 A.1. states that the Board of Directors is responsible to, “Adopt and amend budgets for revenues, expenditures, and reserves in an amount adequate to repair and replace major capital items in the normal course of operations without the necessity of special assessments, provided that the amount set aside annually for reserves shall not be less than ten per cent of the budget for that year unless the reserve requirement is waived annually by the unit owners exercising not less than a majority of the voting power of the unit owners association.”

While this does not specifically require the performance of a reserve study, the requirement to adopt a reserve budget essentially does the same thing.  We believe it is appropriate for Ohio associations to perform reserve studies periodically, and recommend a 3-year cycle as the appropriate period. 

Common industry practice is that homeowners associations should perform periodic reserve studies as a prudent business practice.  Directors of associations are generally held to a “prudent businessman” rule in determining whether or not they have met the fiduciary duty of their position for the association.  A prudent businessman would establish a capital replacement budget (reserve study) to make sure he is generating enough revenues (reserve assessments) to provide for major repairs and replacements.

There is little discussion about whether an association should perform a reserve study.  The only significant areas of discussion revolve around how frequently a reserve study should be performed, and if there should be any minimum funding requirements.  Most states that have reserve study statutes require physical site inspections on 3 or 5 year cycles.  We believe that 5 years is too long.  3 years may be too long if significant reserve expenditures are being made during the subject time period.  However, the association should perform an update without site inspection every year as part of the annual budget process.

 

 

 

 

Additional State Reserve Study Laws