A reserve study is a specialist's estimate of the capital repairs your community will face over the life of the building. It lists each major component, what it will cost to repair or replace and when the work will come due. It ends with the amount the association should save each year to fund the work. The Board then incorporates that recommended annual contribution into the budget as part of its long-term plan for repairing or replacing the common elements.
Maryland and Virginia require an updated study at least every five years. A study used in Fannie Mae's condominium review must be less than three years old. CAI's national standards call an update with a site inspection at least every third year best practice.
The guidance below comes from EJF's CAM Leaders Think Tank on October 16, 2026. Our senior community managers spent more than two hours with reserve specialists on what Boards do once a study arrives.
Key takeaways (the short version)
- A reserve study estimates what each major component will cost and when it will need work. The Board turns it into a plan through the yearly reserve contribution.
- Maryland and Virginia require an update at least every five years. Lenders using Fannie Mae's condominium review need a study less than three years old.
- Construction material prices averaged 41.3 percent higher in 2025 than in 2020. Managers at the session saw communities that followed their plan still face catch-up increases of about 20 percent.
- A study will rarely match a contractor's bid, an online price or an AI estimate. It prices the full scope at commercial rates and adds inflation to the year the work is due.
- An AI estimate is not a reserve study. Maryland law sets who may prepare one and Fannie Mae requires an independent specialist.
- Keep the study in front of the Board all year: in the manager's regular reports, on every annual meeting agenda and in a meeting with the specialist while the report is fresh.
What is a reserve study?
A reserve study is a report from a reserve specialist that helps the Board plan for the community's large, predictable repairs. Think of the roof, elevators, paving, boilers and brick. Each one wears out on a schedule a specialist can estimate.
A full study covers the property and the money:
- The physical analysis. The specialist inspects the property and lists each component the association must repair or replace. For each one the study records its quantity, condition, expected life, remaining life and current replacement cost.
- The financial analysis. The study compares the reserve balance with what the components will need. It ends with a funding plan, the yearly contribution that keeps money in the account as each bill comes due. CAI's standards require the plan to look at least 30 years ahead.
The study is an estimate. It is the specialist's best judgment of what each component will cost and when. The Board makes it a plan by voting the reserve contribution into the annual budget. The plan can then change as real bids and repairs come in.
What are the levels of a reserve study?
CAI's Reserve Study Standards set out levels of service:
- Full study. The specialist visits the site, inventories and assesses every component and builds the funding plan.
- Update with a site visit. The specialist re-inspects the property, checks the earlier component list against what is there and refreshes the estimates and the funding plan.
- Update without a site visit. The specialist revises the life and cost estimates and the funding plan from information the association provides. The specialists at our session use it when a major component fails well ahead of schedule.
After a long gap between studies, the specialists recommend a full study over an update.
How often should an HOA update its reserve study?
At least every five years in Maryland and Virginia, and sooner when costs move fast.
- The law. Maryland requires residential condominiums to update their study at least every five years. The same rule covers HOAs that maintain common areas with components totaling $10,000 or more (Md. Code, Real Prop. 11-109.4 and 11B-112.3). Virginia requires condominiums and property owners' associations to conduct a study at least once every five years and review its results every year (Va. Code 55.1-1965 and 55.1-1826). DC's Condominium Act sets no study schedule. For jurisdictions without a specific requirement, EJF recommends communities update their study every three to five years. Our guide to reserve study and funding rules in DC, Maryland and Virginia covers each jurisdiction in detail.
- The lender. When a lender uses a reserve study in Fannie Mae's condominium review, the study or its update must be completed within three years of the lender's project approval. For loan applications dated on or after January 4, 2027, Fannie Mae's minimum reserve contribution for condominiums under its full review rises from 10 to 15 percent of assessment income. The specialists at our session said most condominiums they see already put 20 to 30 percent of assessments into reserves. Our breakdown of the new Fannie Mae condo rules explains who the rules cover.
- The standards. CAI's standards say: "Best practice is for a site inspection-based reserve study update at least every third year."
Why did the five-year cycle fall behind?
Costs outran the plans. The Bureau of Labor Statistics producer price index for construction materials averaged 41.3 percent higher in 2025 than in 2020. A plan that assumed costs would rise about 3 percent a year expected roughly 16 percent over the same five years.
Managers at our session saw communities on a five-year cycle follow their plan and still fall short, then face catch-up increases of about 20 percent. Participants described studies prepared before 2020 as unusable today. Elevator pricing has more than tripled, they said, and roofing rose more than 30 percent between 2020 and 2025.
Prices are still rising. The same index was 11.0 percent higher in September 2026 than a year earlier.
Some reserve study firms now offer yearly updates on a subscription. At our session the total cost was put at about the same as one full study every five years. Ask your firm to price both before the next update. Update sooner after a major project or a component failure.
Why don't the study's numbers match a bid, an online price or AI?
They price different things. Gaps in both directions are normal.
- A bid prices one job today. A contractor quotes a defined scope at today's prices, sometimes for part of the work. The study prices the full replacement at standard commercial rates and adds inflation to the year the work is due.
- The study plans for what could happen. It funds the potential failure of each component. A bid prices the work in front of the contractor now.
- Markets move. A manager who buys for many communities can sometimes get bids below a study's figure. Costs can also climb past a study that is a few years old.
- Online prices are retail. Prices found online are usually for homes. A community pays commercial prices for commercial-grade work.
- AI estimates miss the building. An AI tool has not inspected your property. It does not account for its condition, its climate or your local market.
Board members with trade experience often dispute a figure from what they have seen on their own jobs. The answer our managers give is that the study is a guide to funding. It is not a quote.
When the Board doubts a figure, test it. Price one or two items, ask your manager for costs from comparable communities and send the real numbers to the reserve specialist. The next update can then reflect them.
How do we read the funding plan?
The funding plan is the table that sets the yearly reserve contribution. Ask the specialist or your manager to walk the Board through it and check these points:
- The starting balance. The plan usually starts from the reserve balance the specialist expects at the end of the fiscal year. It will rarely match the bank statement the Board sees today.
- Inflation and interest. Every plan assumes a rate for rising costs and a rate of interest on reserve savings. One firm at our session uses 3.1 percent inflation, the 15-year average of construction cost indexes, and 2.7 percent interest. Ask what your study assumes.
- The funding method. The component method funds each component on its own and adds the results. The cash flow method pools the money and tests contribution levels against the expenses ahead. Maryland lets a Board choose the component, cash flow, baseline or threshold cash flow method, or another method consistent with generally accepted accounting principles.
- Baseline plans and lenders. A baseline plan aims only to keep the reserve balance above zero. Fannie Mae will not accept a baseline plan in place of its percentage test.
- Percent funded. Fully funded means each component is funded in proportion to how much of its life is used up. It does not mean the account holds the full cost of replacing everything. The specialists said they have not seen a property at 70 percent funded or better in poor financial condition. Our guide to how much an HOA should have in reserves explains percent funded.
- Percentage lines. Some studies fund a share of a large system each year, such as 10 percent of the domestic water piping. That line saves toward the eventual full replacement. It is not an instruction to replace 10 percent of the piping that year. Ask how and when the full replacement will happen.
- One recommended table. If the study shows several funding options, ask the specialist which one they recommend and why.
Do we have to replace a component the year the study names it?
No. The study is a guide for funding. It plans for what could happen to each component. Some components outlast their estimate.
The specialists named elevators, brick pointing and large mechanical systems as components that can show a few years of remaining life for several study cycles. The Board decides when to do the work. Delaying work the association can afford only raises its cost.
Is it a reserve expense or an operating expense?
Boards often ask why they should fund both the replacement and the preventive maintenance of a capital component. Shouldn't it all come out of the reserve contribution? The annual reserve contribution reflects only the replacement cost at the end of the component's useful life. It does not cover planned maintenance or repairs. Preventive maintenance meant to extend the component's useful life is an operating expense, as are repairs that return the component to proper working condition. If you are unsure how to categorize an expense, consult your governing documents, your auditor and association counsel.
How do Boards keep reserves on track all year?
The managers at our session who meet the least resistance at budget time keep reserves in front of their Boards all year:
- In regular reports. A standing reserve section in the manager's report lists the components coming due this year and next.
- At every annual meeting. A walk-through of the reserve study belongs on every annual meeting agenda. Maryland already requires the Board to review progress on its funding plan at each annual meeting. Our HOA annual meeting guide covers the rest of the agenda.
- In the budget. Flag reserve components in the budget even in years with no reserve spending. Virginia requires the Board to review the study's results at least once a year. Maryland requires a review when the Board prepares the annual budget.
- With the specialist. Ask the reserve specialist to walk the Board through the report while it is fresh, by video if that is easier. Managers at our session said the shift from sticker shock to understanding almost always happens in that meeting.
Each person has a lane. The community manager reports what they see in the building day to day. The reserve specialist answers for remaining life and replacement cost. The Board decides what to fund, as part of its fiduciary duties. Our guide to what an HOA management company does covers the manager's side.
Make the study part of every budget cycle. Before the Board adopts next year's budget, go through the study with your community manager.
Frequently asked questions
Can AI do a reserve study?
No. An AI tool can produce a cost estimate. A reserve study needs a qualified, accountable preparer who has seen the property.
- Maryland sets who may prepare a study. The preparer must have prepared or helped prepare at least 30 studies in the past three calendar years, hold a Maryland architect or engineer license, or hold a CAI or APRA reserve designation.
- Fannie Mae requires a study prepared by an independent third party with specific expertise in reserve studies.
- A full study starts with a site visit. AI has not inspected your building and does not know its condition, climate or local prices.
- A reserve study firm can stand behind its work with errors and omissions insurance. An AI tool offers no such coverage.
How much does a reserve study cost?
Price depends on the community's size and complexity and on the level of service. Association Reserves, a reserve study firm, reports that its studies over the past 10 years averaged 0.84 percent of the association's annual budget. Ask for prices on a full study, an update and a yearly subscription.
How often should a reserve study be done?
At least every five years in Maryland and Virginia. Where the law sets no schedule, as in DC, EJF recommends an update every three to five years. Lenders using Fannie Mae's condominium review need a study less than three years old. CAI calls a site-inspection update at least every third year best practice. Update sooner after a major project or a component failure.
What does Maryland's reserve study law require?
Residential condominiums, and HOAs that maintain common areas with components totaling $10,000 or more, need an updated study at least every five years. A qualified preparer writes it. The Board reviews it when preparing the annual budget. Owners get a summary with the proposed budget. A 2025 law also requires associations to fund what the latest study recommends. Confirm the details with association counsel.
Is a reserve study required in DC?
As of October 2026, DC's Condominium Act sets no reserve study requirement for condominium associations. EJF recommends DC communities update their study every three to five years. Lenders using Fannie Mae's full review still check a condominium's reserves. Without a current study, a DC Board has no basis to explain a dues increase or a special assessment to owners.
This article is general information for association Boards and is not legal advice. Your governing documents and association counsel control.
EJF Real Estate Services was founded in 1996 and manages more than 650 HOA and condominium communities in Washington DC, Maryland and Virginia. Our senior community managers meet regularly in the CAM Leaders Think Tank to work through Board questions with outside specialists. Under Full-Service management we prepare the annual operating budget and present it to the Board for approval. If your Board has a reserve study coming due or a funding plan to adopt, request a proposal at ejfrealestate.com/request-proposal or call 202-537-1801.
