Which Components Belong in the Reserve Study?

By: Robert M. Nordlund, P.E.

The Reserve Component List forms the foundation of any Reserve Study. The following is the basic four-part test, now part of National Reserve Study Standards, which we utilize to determine if an expense is appropriate to designate for future funding in the Reserve Study. To be funded, an expense needs to pass all four of the following tests. To summarize, we look for expenses associated with common area maintenance, with limited, predictable life expectancies, above a minimum threshold cost. These expenses may take the form of total replacement, partial replacement, significant repair projects, or regularly anticipated common area expenses.

The first test is that the component must be a common area maintenance responsibility (not maintained by one of the owners), as defined in the association's governing documents or a well-established association precedent.

The second test is that the component must have a limited Useful Life. If the component has a "very extended life" (life of the property) or if it can function indefinitely with minor ongoing maintenance or repair, then there is no major capital expenditure for which to plan.

The third test is that the component must have a predictable Remaining Life. A future expenditure needs to be reasonably anticipated to be defined and incorporated into a plan. Since the bottom line is that a Remaining Life figure must exist, Remaining Life may be estimated for "random" or difficult-to-establish expenditures.

The fourth test is that the expenditure must be above a minimum threshold cost. It is inappropriate to clutter the Reserve budget with anticipated expenses which are small enough that they could, or should, be handled in the ongoing operational budget. This threshold varies among associations, but is often in the range of .5% to 1% of the annual budget.


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