What is the primary purpose of a reserve fund study?

The primary purpose of a reserve fund study is to ensure accuracy and appropriate amounts in the reserve fund. A reserve fund study is conducted to assess the long-term financial needs of a property, typically for condominiums and homeowners associations. It evaluates the current condition of the property and its major components, such as roofs, boilers, and parking lots, estimating their remaining useful life and the cost of repairing or replacing them.

By understanding these factors, the study helps the property management to determine how much money needs to be allocated to the reserve fund annually in order to cover future maintenance or replacement costs. This not only ensures financial stability for the property but also helps in avoiding special assessments or unexpected fees for owners when major repairs are necessary.

In contrast, increasing property value, enabling renovation projects, or determining property tax rates may be associated with the overall goals of a property but do not directly align with the specific function of a reserve fund study, which is focused on financial planning for long-term maintenance and repair of the property.