Tennessee HOA Reserve Fund Requirements (2025 Guide)

Key Provisions of Senate Bill 863

Key provisions:

• Triggered Reserve Study Updates: Boards are required to update or conduct a reserve study when significant changes occur, such as:
  • Major repairs or replacements to common elements.
  • Financial changes impacting the reserve fund.
• Transparent Financial Management: Associations must use the reserve study findings to create or adjust funding plans and communicate them to homeowners.
• Proactive Maintenance Planning: The legislation encourages associations to anticipate future needs and maintain reserves sufficient to handle repairs and replacements without resorting to special assessments.

Benefits of Conducting Reserve Studies

Reserve studies offer numerous advantages for Tennessee HOAs and condominium associations:

• Accurate Financial Planning: Reserve studies provide a clear forecast of long-term costs, allowing associations to budget effectively.
• Avoiding Special Assessments: Adequate reserves minimize the need for unexpected financial contributions from homeowners.
• Transparency and Trust: Sharing reserve study findings builds homeowner confidence in the board’s financial management.
• Maintained Property Values: Proper maintenance supported by reserve funds ensures the community remains attractive and valuable.

Step-by-Step Guide to Complying with New Jersey’s Reserve Study Law

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:

Hire a Certified Reserve Study Professional

‍Engage a qualified expert to assess your community’s shared assets and funding needs.

Inventory Common Property

‍Identify all shared elements, such as roofs, roads, and recreational facilities, and evaluate their current condition and lifespan.

Estimate Costs and Lifespans

‍Calculate the remaining useful life and replacement costs of each asset, factoring in inflation and potential cost increases.

Develop a Funding Plan

‍Use the reserve study to establish a funding plan that ensures reserves are adequate to cover future expenses.

Communicate Findings

‍Share the reserve study results and funding strategy with homeowners to maintain transparency and alignment.

Update When Necessary

‍Conduct or update the reserve study whenever significant changes occur to the property or finances, or every three to five years as a best practice.