Who Should Perform Studies? The Davis-Stirling Act does not
specify who should perform reserve studies for common interest developments. That means it could be
performed by a CPA, a manager or the board. However, an independent,
credentialed reserve analyst is the best option for three reasons:
- Expertise. Boards rarely have the expertise to evaluate the condition of a component, its remaining life and the cost to replace it.
- Liability. Boards should not take on potential liability.
There is much less exposure to associations and boards to have an
independent, credentialed specialist 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 in-house studies performed by the board or a manager. 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.
What to Ask. Boards should ask prospective reserve study companies (i) are they credentialed? and (ii) how long have they been performing studies? Do they follow National Reserve Study Standards?
Designations. The Community Associations Institute (CAI) issues a "Reserve Specialist" credential to qualified individuals. There is a similar credential called the "Professional Reserve Analyst" administered by the Association of Professional Reserve Analysts.
ASSISTANCE: Associations needing legal assistance can contact us.
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