Reserve Study Disclosures

Many associations have extremely low reserves, which has resulted in the California legislature increasing disclosure requirements and establishing funding plans so as to avoid large special assessments. Residential associations with common areas are required to perform a reserve study at least every three years. Boards are required to make the following reserve disclosures each year:

  • Deficiencies. Disclose any deficiencies in the reserves expressed on a per unit basis
  • Deferrals. Disclose whether the board plans to defer repairs or replacements of any major components, including a justification for the deferral.
  • Loans. Disclose whether the association has any outstanding loans with an original term of more than one year, including the payee, interest rate, amount outstanding, annual payment, and when the loan is scheduled to be retired.
  • Funding Plan. Prepare and distribute a funding plan that indicates how the board plans to fund the annual contributions to meet the association's obligation for the repair and replacement of all major components. The reserve funding plan must be adopted in. an open meeting. Effective January 1, 2009, boards must distribute their reserve funding plan to all members along with the association's annual operating budget, not less than 30 nor more than 90 days before the start of the association's fiscal year.
  • Assessments. If the board determines an assessment increase is required to fund the reserves, the assessment must be adopted in an open meeting and separately from the adoption of the funding plan.
  • Form of Disclosures. Prepare and distribute specific reserve funding disclosures in a format that complies with California Civil Code Section 5570.

The disclosure must be provided to all members not less than 30 nor more than 90 days prior to the beginning of the association's fiscal year.

Associations may change a reasonable fee for copies of the reserve report. Boards may also make documents available in electronic form. Boards should build the cost of reserve studies into their annual budgets.

Pacific Reserve Studies