A reserve study is an inspection of the common elements that is intended to analyze the repair and replacement needs of a Condominium or HOA. A reserve study serves two important purposes.
First, a reserve study allows for an Association to accurately budget for major repairs over an extended period of time and avoid large additional or special assessments for major projects. Without a reserve study, it is very difficult for an Association to accurately budget for major repairs and replacements. The Michigan Condominium Act, MCL 559.205, and Administrative Rule 511, require a Condominium to maintain a minimum reserve fund that is equivalent to 10% of the association’s current annual budget on a noncumulative basis. The minimum reserve fund required by law is rarely enough to fund major repairs or projects. Accordingly, it is recommended that an Association fund its reserve based on the reserve study and not just maintain the minimum amount required by law.
Second, a reserve study provides an opportunity for an Association to learn about construction defects or other unsafe conditions in the common elements that are in need of repair. It is recommended that a reserve study be performed immediately after turnover from the Developer and updated at least every three (3) years to ensure that the Association is adequately informed of the condition of the project.
The Meisner Law Group does not perform reserve studies, but we recommend that you find a reserve study provider that has experience with condominium and homeowner associations.