Montana Reserve Study Law

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Montana has not (as of April 2019) adopted any statutes specific to Reserve Studies.

Industry standards are that HOAs and Community Associations should have a Level 1 Reserve Study (full initial with site visit) on file, and should perform Level 3 updates (Update Without Site Visit) annually. States that have adopted reserve study laws dictate a full update with site visit (Level 2) should be performed every 3 to 5 years.

We believe 5 years is too long between on-site updates. For communities with older infrastructure, or when significant reserve expenditures have occurred, 3 years may even be too long.

There is little discussion as to IF a community association should have a reserve study. The primary discussion is how frequently the RS should be updated. We recommend annual updates to your Reserve Study and Funding Plan to ensure your community is on track to achieve its funding goals.

Another area of discussion centers around minimum funding requirements. Washington State law requires an annual funding disclosure from each Association’s Board of Directors; the seven required parts of the funding summary are listed below:

  1. The current amount of regular assessments budgeted for contribution to the reserve account, the recommended contribution rate from the reserve study, and the funding plan upon which the recommended contribution rate is based;
  2. If additional regular or special assessments are scheduled to be imposed, the date the assessments are due, the amount of the assessments per each unit per month or year, and the purpose of the assessments;
  3. Based upon the most recent reserve study and other information, whether currently projected reserve account balances will be sufficient at the end of each year to meet the association’s obligation for major maintenance, repair, or replacement of reserve components during the next thirty years;
  4. If reserve account balances are not projected to be sufficient, what additional assessments may be necessary to ensure that sufficient reserve account funds will be available each year during the next thirty years, the approximate dates assessments may be due, and the amount of the assessments per unit per month or year;
  5. The estimated amount recommended in the reserve account at the end of the current fiscal year based on the most recent reserve study, the projected reserve account cash balance at the end of the current fiscal year, and the percent funded at the date of the latest reserve study;
  6. The estimated amount recommended in the reserve account based upon the most recent reserve study at the end of each of the next five budget years, the projected reserve account cash balance in each of those years, and the projected percent funded for each of those years; and
  7. If the funding plan approved by the association is implemented, the projected reserve account cash balance in each of the next five budget years and the percent funded for each of those years.

While each association can manage their plans independently in Montana, we recommend a minimum 30% Funded level and suggest that Associations strive to reach the 70% Funded level of reserves.