Hawaii HOA Reserve Fund Requirements (2025 Guide)

Hawaii Reserve Study Requirements: Overview

Hawaii’s reserve study law emphasizes financial planning and transparency, requiring associations to:

1. Hire Independent Reserve Preparers: Reserve studies must be reviewed by a qualified, independent professional.
2. Update Regularly: Associations are required to revisit and update their reserve study every three years.
3. Incorporate Results in Budgets: Condominium budgets must include detailed information on reserve funds, future reserve estimates, and funding calculations.
4. Use a Detailed Formula: Estimated reserves are calculated using a formula that considers the estimated lifespan and replacement costs of property components.

Benefits of Conducting Reserve Studies

Hawaii’s laws ensure that reserve studies provide significant advantages for condominium associations:

• Accurate Financial Planning: Reserve studies help associations forecast future maintenance costs and plan accordingly.
• Avoiding Underfunding Risks: Adequate reserves minimize the need for special assessments or emergency funding.
• Transparency with Owners: Including reserve details in budgets fosters trust between the association and homeowners.
• Long-Term Property Maintenance: By planning for 30 years of expenditures, associations can maintain their property’s condition and value over time.

Step-by-Step Guide to Conducting a Reserve Study

Conducting a reserve study might seem daunting, but it can be broken down into a straightforward process that ensures accuracy and effectiveness. Here’s a step-by-step guide:

Engage an Independent Reserve Study Preparer

Work with a certified, independent professional to ensure compliance with the law and an unbiased reserve study.

Inventory Property Components

List all parts of the property requiring capital expenditures or major maintenance, separating items costing over $10,000 from smaller components.

Estimate Lifespans and Replacement Costs

Use the formula required by law to calculate the remaining useful life and replacement costs of each component.

Develop a 30-Year Cash Flow Plan

Create a financial strategy covering 30 years of expenditures and revenues to ensure long-term reserve sufficiency.

Update Every Three Years

Regularly revisit the reserve study to account for changes in property conditions or financial needs.

Communicate Findings

Incorporate the reserve study results into the association’s annual budget, providing homeowners with transparent and detailed financial information.