“Is there a law that requires an association to have a Reserve Study done?”
Legal Reserve Study requirements vary from state to state, however the government does require reserve studies in approximately 20 states. Even if it is not currently governed by your state, the chances are very good that the documents of the association require the association to have a reserve fund established. This does not mean a Reserve Study is required, however it is hard to know if there are enough funds in the reserve account if you don’t have the proper information.
Some associations look at the reserve fund and think $50,000 is a lot of money and they are in good shape. What they don’t know is that the roof is going to need to be replaced within 5 years, and the cost of the roof is going to exceed $75,000. So while $50,000 sounds like a lot of money, in reality it won’t even cover the cost of a roof, let alone all the other components the association is responsible to maintain.
Many states have passed legislation or have pending Legal Reserve Study requirements to protect homeowners’ interests. In addition, many lending institutions require an association to have a reserve study in place before they will approve funding. Lastly, homeowners are becoming increasingly educated regarding reserve funds and often request to see documentation before purchasing a home in a community.