LA Condo Reserve Studies: Read Beyond Percent Funded

A percentage needs its supporting study

Percent funded compares a reserve balance with an estimated accumulated funding requirement. It is not a probability of an assessment, a building inspection result or a guarantee that future work can be paid for. Ask for the study and disclosure behind the figure before using it to compare associations.

California Civil Code 5570 sets out an assessment and reserve funding disclosure, including projected balances and assumptions. Its calculation framework does not by itself require the board to fund reserves according to that calculation. That distinction is a reason to read the funding plan as well as the headline percentage.

Check the dates and the component list

Civil Code 5550 describes a reserve-study framework with a visual inspection at least every three years when its component-value condition is met, and annual review of the study. It calls for component life and cost estimates, required contributions and a funding plan. Applicability should be checked against the current law and association circumstances.

For your research, write down the inspection date, report date and update date. Ask which major components are included, which were excluded and what explanation accompanies an exclusion. Then identify changes since the study: completed work, revised estimates or newly identified projects.

Follow the money through time

A reserve balance today does not explain whether money is available when a large project is due. Ask for the projected cash balances and funding schedule, then compare them with the budget the association actually adopted. Identify whether the plan depends on approved contributions or on decisions still to be made.

When two associations show different percentages, avoid ranking them without comparing scope, timing and assumptions. A figure based on a different component list or date may not be directly comparable. Ask the study preparer or another qualified professional to explain the differences that matter.

Separate estimates from current obligations

Request the regular assessment schedule for the unit and any approved special assessments. Ask which projects are proposals, which have approved funding and which have a signed work contract. A long-range replacement estimate and a payment notice are different kinds of information.

If association borrowing is involved, ask management to identify the relevant documents and the budget treatment. Have your attorney explain any purchase-contract consequences. Do not assume a seller or buyer must pay a charge without reviewing the actual agreement and current records.

Keep a useful comparison record

Use /research/condo-document-checklist to keep dates, sources and outstanding questions together. Record what the documents establish and which conclusions need professional interpretation. For inspection questions involving exterior elevated elements, see /blog/sb-326-balcony-inspection-la-condos.

LA Condo HQ does not assign an association-health rating from a reserve percentage. The purpose of this guide is to make a professional review more focused and to avoid substituting a rule of thumb for the documents governing the property.