Understanding the Updated National Reserve Study Standards: A Guide for Community Associations


Sean Andersen, RS is President of Association Reserves Orange County


As the community association industry evolves, so too must our standards and practices. Prudent financial planning is paramount for community associations. National Reserve Study Standards serve as a guiding light for ensuring the long-term sustainability of our communities. The updated standards help reserve analysts provide comprehensive and reliable reserve studies for their clients.


The updated National Reserve Study Standards, released in July 2023, represent a significant milestone in the field of reserve studies. One of the key aspects of the updated standards is the emphasis on transparency and clarity. The standards outline clear guidelines for conducting reserve studies, including the scope of the study, the methods for estimating future costs, and the presentation of findings. By adhering to these standards, reserve analysts, and the community associations they serve, can ensure that their reserve studies are thorough, accurate, and easily understandable for all stakeholders.


Another important aspect of the updated standards is their focus on risk management and planning. In today’s uncertain environment, it is more important than ever for community associations to be prepared for unexpected expenses and emergencies. The updated standards encourage directors to assess potential risks to the physical assets and to develop plans to mitigate those risks. This proactive approach can help boards avoid financial pitfalls and ensure the long-term viability of their communities.


The new Reserve Study Standards are broader than the previous standards. There is a new three-part test that replaced the previous four-part test. The new test should be used to select which components are included in the reserve study. To be included in the reserve study, the component should comply with these three tests:


1. The Association has the responsibility for the component.


2. The need and schedule for maintenance, repair, and replacement can be reasonably anticipated.


3. The total cost for the maintenance, repair, and replacement of the component is material, can be estimated, and includes all direct and related costs.


This new test will result in more recommendations to obtain preventive maintenance schedules and include them in the study, more encouragement to follow those preventive maintenance schedules, and more recommendations to get specific subject matter expert reports, like infrastructure and decking inspections. The broader three-part test will incorporate inspections and one-time corrective repairs into reserve studies. It is now recommended, but not required, that components with an anticipated, useful life in excess of 30 years also be incorporated into reserve planning efforts. Reserve funding offsets the ongoing deterioration that is occurring right now, including for components with an anticipated, useful life of over 30 years.


These new standards also clarify the “sweet spot” between the time and expense of reserve planning and the consequences of lack of planning. They will help community associations navigate and develop robust reserve plans that meet their unique needs. They will also help reserve specialists guide associations through the process with expertise and professionalism. This update represents a significant step forward for the field of reserve studies. By adhering to these standards, community associations can ensure the long-term financial health of their communities and provide valuable information for their residents.


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