States With No Reserve Study Statutes

The states listed below have not adopted any specific statutes related to reserve study performance, disclosures, or funding requirements.  That doesn't mean that the associations in these states should simply ignore the obligation to perform a reserve study.  That obligation comes in the form of fiduciary duty that each board member has to the members of the association to assure that the association is able to meet its financial obligations both currently and in the future.   It is common industry practice for homeowner associations to perform periodic reserve studies.  This is simply a matter of exercising prudent business judgment.  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.

States that have no statutes that even address the topic of reserve studies include:

Additional State Reserve Study Laws