We’ve posted articles in the past about the importance of associations maintaining adequate reserves for the repair and replacement of the capital components in their communities that the association has the duty to maintain, repair and replace. Section 55.1-1965 of the Virginia Condominium Act and Section 55.1-1826 of the Virginia Property Owners Association (POA) Act both require that associations conduct a reserve study every five (5) years. Both Acts also require that the Board of Directors review the reserve study on an annual basis to determine if the association is collecting adequate reserves in the annual budget to make sure funds are available each time a capital component needs major repairs or replacement and to adjust the reserve budget annually if necessary.
Both laws also contain very general provisions for what should be included in a reserve study but association volunteer board members can still be left with lots of questions regarding what needs to be included in a reserve study or why their association needs to expend it’s limited funds to pay a professional to perform an inspection and prepare a written reserve study.
The Virginia General Assembly enacted an addition to both the Condominium Act and the POA Act statutes regarding budgets and reserves that required the Common Interest Community (CIC) Board to publish guidelines for the preparation of reserve studies. These guidelines have now been adopted and posted on the CIC Board website at www.dpor.virginia.gov/Boards/CIC-Board under “Guidelines for the Development of Reserve Studies for Capital Components” (hereinafter “Guidelines”).
The Guidelines state that “This document is not intended to regulate the development of or define a “standard of care” for reserve studies, and does not prescribe, or proscribe, any specific method for developing such studies.” This means that these Guidelines are meant to be an educational tool for associations and do not mandate that reserve studies be performed only according to the Guidelines. However, the Guidelines do provide in easy to understand “laymen’s terms” why reserve studies are necessary for good association governance, the basic types of reserve studies and what should be included in the study.
Please note that effective October 1, 2019, the code section numbers for the Condominium Act and POA Act which are included in the Guidelines were replaced with the code sections listed in the first paragraph of this posting. The provisions for reserve studies and budget preparation in these code sections as referenced in the Guidelines have not changed, just the code section reference numbers. The Title 55.1 Conversion Table for the old and new Code sections can be found at: www.vsb.org/docs/sections/realproperty/appendixb.pdf.