What is a reserve study?
A reserve study is a long-term capital budget planning tool which identifies the current status of the reserve fund and a stable and equitable funding plan to offset ongoing deterioration, resulting in sufficient funds when those anticipated major common area expenditures actually occur. The reserve study consists of two parts: the physical analysis and the financial analysis. This document is often prepared by an outside independent consultant for the benefit of administrators (Board of Directors or Strata Council Members) of a property with multiple owners, such as a condominium association or homeowners' association (HOA), strata, containing an assessment of the state of the commonly owned property components as determined by the particular association's CC&Rs and bylaws. Reserve studies however are not limited only to condominiums and can be created for other properties such as resort (shared vacation ownership) properties, apartment buildings, worship facilities, private schools, private (golf/social) clubs, and office parks.
Reserve studies are in essence planning tools designed to help the board anticipate, and prepare for, the property's major repair and replacement projects. For example, such projects would include: replacement of the roof on the building(s), replacement of the boiler, retrofit of the fire alarm devices, and resurfacing of the roadways.
In some jurisdictions across Canada, a reserve study is also sometimes referred to as a "reserve fund study", "contingency reserve fund study", or "replacement reserve study" and, in British Columbia, the legislation refers to this type of study as a "Depreciation Report".