Who needs to conduct a reserve study
Prince George’s County. Associations who have not conducted a reserve in the last five (5) years.
Montgomery County. Associations who have not conducted a reserve in the last five (5) years.
Maryland. All Associations established on or after October 1, 2022 or any associations that have not had a reserve study conducted on or after October 1, 2018.
Maryland Reserve Study Requirements
The Maryland Condominium Act and Maryland Homeowners Association Act require associations across the state to undertake a reserve study at least once every five (5) years.
The new Maryland law (Bill 107) was introduced to require condominiums, homeowner association and housing cooperatives in Maryland to undertake and update a reserve study at least once every 5 years. Introduced in 2022, the new law requires all new associations established after October 1, 2022 and those have had a reserve study conducted before October 1, 2018, to conduct a reserve study on or before October 1, 2023.
Who needs a
How often do you need to
update a Reserve Study
Every 5 years
Who does not need to get a
HOAs with $10,000
or less in assets.
Providing reserve studies throughout MARYLAND, VIRGINIA, NORTH & SOUTH CAROLINA.
Serving the Northeast
1320 Central Park Blvd,
Fredericksburg VA 22401
The new legislation extends the need for reserve studies statewide. Previously only Montgomery and Prince George’s Counties were required to undertake a reserve study every five (5) years.
It should be noted that Homeowner Associations (HOAs) with common assets of $10,000 or less are exempt from the new law.
Reserve Study Legislation
Maryland Homeowners Association Act | Title 11B
§ 11B-112.3. Reserve study of homeowners association common areas -- Criteria.
(a) In this section, “reserve study” means a study of the reserves required for future major repairs and replacement of the common areas of a homeowners association in Prince George’s County that:
(1) Identifies each structural, mechanical, electrical, and plumbing component of the common areas and any other components that are the responsibility of the homeowners association to repair and replace;
2) States the estimated remaining useful life of each identified component;
(3) States the estimated cost of repair or replacement of each identified component; and
(4) States the estimated annual reserve amount necessary to accomplish any identified future repair or replacement.
(1) This section applies only to a homeowners association in Prince George’s County that has responsibility under its declaration for maintaining and repairing common areas.(2) This section does not apply to a homeowners association that issues bonds for the purpose of meeting capital expenditures.
(1) This subsection applies to a homeowners association established on or after October 1, 2020.
(2) The governing body of the homeowners association shall have an independent reserve study completed not more than 90 calendar days and not less than 30 calendar days before the meeting of the homeowners association required under § 11B-106.1(a) of this title.
(3) The governing body shall have a reserve study completed within 5 years after the date of the initial reserve study conducted under paragraph (2) of this subsection and at least every 5 years thereafter.
(1) This subsection applies to a homeowners association established before October 1, 2020.
(2) If the governing body of a homeowners association has had a reserve study conducted on or after October 1, 2016, the governing body shall have a reserve study conducted within 5 years after the date of that reserve study and at least every 5 years thereafter.
(3) If the governing body of a homeowners association has not had a reserve study conducted on or after October 1, 2016, the governing body shall have a reserve study conducted on or before October 1, 2021, and at least every 5 years thereafter.
(e) Each reserve study required under this section shall:
(1) Be prepared by a person who:
(i) Has prepared at least 30 reserve studies within the prior 3 calendar years;
(ii) Holds a bachelor’s degree in construction management, architecture, or engineering or equivalent experience and education;
(iii) Holds a current license from the State Board of Architects or the State Board for Professional Engineers; or
(iv) Is currently designated as a reserve specialist by the Community Association Institute or as a professional reserve analyst by the Association of Professional Reserve Analysts;
(2) Be available for inspection and copying by any lot owner;
(3) Be reviewed by the governing body of the homeowners association in connection with the preparation of the annual proposed budget; and
(4) Be summarized for submission with the annual proposed budget to the lot owners.
Maryland Condominium Act | Title 11
§ 11-109.2. Annual proposed budget
(b) Items required to be included. — The annual budget shall provide for at least the following items:
(1) Income;(2) Administration;(3) Maintenance;(4) Utilities;(5) General expenses;(6) Reserves; and(7) Capital items.
(c) Reserves in annual budget. — In Prince George’s County, the reserves provided for in the annual budget under subsection (b) of this section shall be the funding amount recommended in the most recent reserve study completed under § 11-109.4 of this title.
(d) Adoption. —
(1) The budget shall be adopted at an open meeting of the council of unit owners or any other body to which the council of unit owners delegates responsibilities for preparing and adopting the budget.
(i) The council of unit owners or other governing body of unit owners shall submit the adopted annual budget to the unit owners not more than 30 days after the meeting at which the budget was adopted.
(ii) The adopted annual budget may be submitted to each unit owner by electronic transmission, by posting on the condominium association’s home page, or by inclusion in the homeowners association’s newsletter.
(e) Certain expenditures in excess of 15 percent of budgeted amount to be approved by amendment. — Any expenditure made other than those made because of conditions which, if not corrected, could reasonably result in a threat to the health or safety of the unit owners or a significant risk of damage to the condominium, that would result in an increase in an amount of assessments for the current fiscal year of the condominium in excess of 15 percent of the budgeted amount previously adopted, shall be approved by an amendment to the budget adopted at a special meeting, upon not less than 10 days written notice to the council of unit owners.
(f) Authority of council to obligate itself for certain expenditures unimpaired. — The adoption of a budget shall not impair the authority of the council of unit owners to obligate the council of unit owners for expenditures for any purpose consistent with any provision of this title.
(g) Applicability to condominiums occupied and used solely for nonresidential purposes. — The provisions of this section do not apply to a condominium that is occupied and used solely for nonresidential purposes.
Maryland Reserve Studies
Our team of reserve study professionals works with associations throughout Maryland, Virginia, North & South Carolina.
Top 10 Cities Served
What is a Reserve Study?
A Reserve Study is a budget planning tool, used by Condominium and Homeowner Associations to create an effective funding plan for anticipated common area expenditures over a period of time (normally 30 years). The Reserve Study consists of two parts, a physical analysis and a financial analysis.
The physical analysis initially entails a site inspection which is a limited visual inspection of the association’s common area components. The Study generally does not include invasive or destructive testing. The purpose of the physical analysis is to identify common area components, evaluate their condition, determine useful life, remaining useful life, and estimate the major repair or replacement cost.
The financial analysis establishes an appropriate annual reserve contribution rate.
Is there a legal requirement for reserve studies?
In recent years many states, including California, Oregon, Hawaii, Utah, Virginia and Washington, have introduced laws which mandate the requirement for condominium and homeowner associations to have reserve studies prepared on a regular cycle (1 to 6 years). Other states such as Montana and North Dakota have no specific legislation in place. However, even when there is no legal requirement it is still prudent to have a reserve study prepared on a regular basis.
For information on specific state requirements we recommend that you review our LAW page.
When is a Reserve Study required?
Timing requirements for reserve studies differ with varying state legislation, but every association that has common area components should have a reserve study prepared on a periodic basis. We believe that the reserve study should be used to assist a board in making budgetary decisions for the coming financial years. This means that the reserve study should be prepared a couple of months in advance of the board meeting (timing will vary depending on the association’s fiscal year).
Who can prepare a reserve study?
Reserve studies are usually prepared by people trained and certified in the field. One such certification, Reserve Specialist (RS), is available through the Community Associations Institute (CAI). To obtain this certification, candidates must have prepared at least 30 reserve studies within the past 3 calendar years, hold a bachelors degree in construction management, architecture, or engineering (or something equivalent based on experience and education), and comply with industry standards and code of conducts.
Another credential is the Professional Reserve Analyst (PRA), created and promoted by the Association of Professional Reserve Analysts (APRA).
How do I start the process to obtain a Reserve Study?
The process starts with the request for a proposal. Proposals can be obtained by filling in the request form on this website or alternatively by calling one of our Reserve Specialists in the office toll free at (888) 315-2843.
How long does it take to complete a Reserve Study?
A reserve study will typically be completed to a final draft stage within four weeks of a signed contract.
The financial analysis establishes an appropriate annual reserve contribution rate.
How much does a reserve study cost?
The cost of a reserve study is dependent on the complexity, size and location of an association and is basically a function of the time taken to prepare the report. Reserve study options and associated pricing can be provided on request within 1-2 business days.
What is an acceptable level of Reserve Funding?
Determining an appropriate level of funding is subjective as each association will have a particular view of what is acceptable for their own particular circumstances.
In the context of funding levels the term “percent funded” is often used. This is a measure of current reserves compared with accumulated depreciation of common area components. It refers to the level of an association’s actual reserves compared with the fully funded balance, expressed as a percentage. The percent funded level can also be used to define an acceptable level of reserve funding and to set goals for associations to improve the level of their reserves.
How are Reserve Contribution Rates determined?
The reserve study funding plan is used to determine the contribution rates required to provide sufficient funds for the estimated future major repair and replacement costs of common area components
Factors that need to be considered are:
current reserve funding,
the projected annual funding required,
the acceptable level of increase in the level of funding, and
inflation and interest factors.
These items are all taken into consideration and discussed with association management when preparing the reserve study.
What common area components are included in a Reserve Study?
Determination of what constitutes a reserve component is dependent on a number of factors. Unless explicitly determined otherwise, a four-part test is used to distinguish a reserve expense from that of an operational or maintenance expense.
A reserve component will generally satisfy the following criteria:
The component is part of the Association’s common or limited common area responsibilities.
The component has a predictable useful service life.
The component’s useful life fits within the projection period (normally 30 years).
The component’s cost for repair and replacement is too high to be included as part of the operating or maintenance budgets.