Condominium Reserve Studies

What is a Reserve Study?

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A reserve study is a detailed report that assists a condominium association in planning for long-term expenses for future replacement of the condominium’s common element components. These common element components, which are the responsibility of the condominium association to replace, may differ for every condominium but they usually will include driveways, parking lots, sidewalks, roofs, siding, windows, stairways, porches, balconies, and other capital expense items.

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A reserve study inventories these various common element components and estimates the costs and timing of their replacements over a 30-year period. Each component is given a useful life, remaining life, and estimated future cost. A reserve study then calculates the funds necessary to cover these expenses by creating a Funding Plan. The annual reserve contribution should ensure the amount of needed funds are available at the time the component is projected to be replaced. Over time each owner of a unit should contribute their fair share to the reserve account.

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The Governing Body of a condominium has a legal and fiduciary duty to maintain the condominium in a state of good and safe condition, and to collect the funds necessary. Reserve Studies help board members fulfill their fiduciary duty and help avoid litigation against an association. The Maryland legislation regarding reserve studies gives the Governing Body the authority to increase an assessment levied to cover the reserve funding amount required.