The three duties
Under both the Property Owners' Association Act (55.1-1826 B) and the Condominium Act (55.1-1965 B), the board must:
- Study. Have a reserve study done at least once every five years to decide whether reserves for capital components are needed, and how much.
- Review. Look at the study's results at least once a year to judge whether reserves are still adequate.
- Adjust. Change the budget and the annual assessment where the board thinks it necessary to keep reserves where they need to be.
"Capital components" are the items the association must maintain and for which the board decides funding is needed, whether or not they sit in the common area (55.1-1800). Roofs, paving, pools, elevators, siding and stormwater ponds are the usual list.
What the budget has to show
If the study says reserves are needed, subsection C of each section requires the budget to carry four things:
- The current estimated replacement cost, remaining life and useful life of each capital component.
- The cash reserves built up as of the start of the fiscal year, and the amount the association expects to add during that year.
- A statement of the procedures used to estimate and accumulate the reserves.
- The reserve amount the study recommends, next to the cash actually set aside for replacements.
The board must make the budget, or a summary of it, available to owners before the fiscal year starts (subsection A). Subsection D lets the board pay for repairs and replacements from reserves, extra assessments or borrowing.
Where the two acts differ
Only in one phrase. The condominium section applies "unless the condominium instruments provide otherwise". The owners' association section has no such opening, so its duties apply as written. Everything else, from the five-year cycle to the four budget items, reads the same.
What the Code leaves open
- Who prepares it. No license or credential is named. Most boards choose a CAI Reserve Specialist or an APRA Professional Reserve Analyst.
- How deep it goes. The Code does not require a site visit each time. CAI's reserve study standards define a full study, an update with a site visit and an update without one.
- A funding target. There is no required percent funded. The board decides, with the study's plan in front of it.
At resale
When an owner sells, the resale certificate (55.1-2310) must include approved capital expenditures, the reserve balance and any designated portions, the operating budget and the current reserve study or a summary. A stale study shows up there first.