Washington Reserve Study

2012

Senate Bill 5223 (House Bill 1309) extended the 2008 requirements for condominiums to homeowners associations. The new Washington State reserve study law impresses upon homeowner associations to undertake and update a reserve study annually.

Reporting and disclosure requirements were also introduced for both condominium (condo) and homeowner (HOA) associations. An association’s board of directors must annually disclosure a reserve fund summary (RCW 64.34.308, RCW 64.38.025). The ‘seven part’ information summary should be disclosed to association unit owners as part of the summary of the budget:

1. The current amount of regular assessments budgeted for contribution to the reserve account, the recommended contribution rate from the reserve study, and the funding plan upon which the recommended contribution rate is based;
2. If additional regular or special assessments are scheduled to be imposed, the date the assessments are due, the amount of the assessments per each unit per month or year, and the purpose of the assessments;
3. Based upon the most recent reserve study and other information, whether currently projected reserve account balances will be sufficient at the end of each year to meet the association’s obligation for major maintenance, repair, or replacement of reserve components during the next thirty years;
4. If reserve account balances are not projected to be sufficient, what additional assessments may be necessary to ensure that sufficient reserve account funds will be available each year during the next thirty years, the approximate dates assessments may be due, and the amount of the assessments per unit per month or year;
5. The estimated amount recommended in the reserve account at the end of the current fiscal year based on the most recent reserve study, the projected reserve account cash balance at the end of the current fiscal year, and the percent funded at the date of the latest reserve study;
6. The estimated amount recommended in the reserve account based upon the most recent reserve study at the end of each of the next five budget years, the projected reserve account cash balance in each of those years, and the projected percent funded for each of those years; and
7. If the funding plan approved by the association is implemented, the projected reserve account cash balance in each of the next five budget years and the percent funded for each of those years.

2008

Senate Bill 6215 introduced the requirement that condominium associations complete and update a reserve study annually (Washington State Condominium Reserve Study Law). As stated with RCW 64.34, an association is ‘encouraged to establish a reserve account to fund major maintenance, repair, and replacement of common elements, including limited common elements that will require major maintenance, repair, or replacement within thirty years’ (RCW 64.34.380). In cases where a reserve study is not prepared in accordance with the act, an association must disclose that they do not have a current reserve study.

Wondering if you need a reserve study?

Associations’ should be aware that they can opt out of updating their reserve study annually if doing so would impose an unreasonable hardship. Condominium associations with ten units or less can agree to exempt themselves from the requirements with a two-thirds vote by owners (RCW 64.34.392). Homeowner associations are not required to follow the reserve study requirements if ‘the cost of the reserve study exceeds five percent of the association’s annual budget, the association does not have significant assets, or there are ten or fewer homes in the association (RCW 64.38.090).