Can capital improvements be included in the reserve study?

For purposes of this question we are defining capital improvements as the expenditure of funds for new, not previously existing, components.

Some associations want to include capital improvements in the reserve study. Most do not. In our experience the only reason that associations include capital improvements in their reserve study funding plan is because they do not have a separate capital improvements budget and it is a very rare occurrence that they will actually construct a capital improvement.

The association should look first to their governing documents to determine if there are any limitations on inclusion of capital improvements within the reserve funding plan. Secondly they should look at state law to see if state law prohibits either the accumulation of or expenditure of funds from the reserve fund for other purposes such as capital improvements.

Our recommendation is that it is generally preferable to keep capital improvements funding separate from the reserve study report.


For more Reserve Study Questions and Answers