Independent Reserve Analysts
The Davis-Stirling Act does not specify who should perform reserve studies for common interest developments. That means a CPA, a manager, or the board could perform it. However, an independent, credentialed reserve analyst is the best option for three reasons:
- Expertise. Boards rarely have the expertise to evaluate a component's condition, remaining life, and replacement cost.
- Liability. Boards should not take on potential liability. There is much less exposure to associations and boards for an independent, credentialed specialist to prepare the study. Depending on the extent of the common areas, preparing reserve studies internally arguably violates the Business Judgment Rule.
- Politics. Having a specialist prepare the study also saves the board a lot of criticism. Homeowners who dislike the board will often challenge the board's or a manager's in-house studies. Using a specialist eliminates such criticism.
The arguments for an independent professional are stronger when the association needs a “full” or “update with-site-visit” reserve study. Less sensitive “update no-site-visit” reserve study projects tend to be much simpler and less of a problem if done internally. Boards should ask prospective reserve study companies (i) if they are credentialed and (ii) how long they have been performing studies. Do they follow National Reserve Study Standards? The Community Associations Institute (CAI) issues a "Reserve Specialist" credential to qualified individuals. A similar credential is called the "Professional Reserve Analyst," administered by the Association of Professional Reserve Analysts.
Reserve Study Companies
Below is a list of companies that perform reserve studies. ADAMS|STIRLING does not endorse any particular company. Boards of directors must do their due diligence when selecting a reserve study professional.
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