Reserve Studies
Reserve Study Glossary: Key Terms Explained
Reserve studies and HOA finances come with a vocabulary that can be bewildering to a new board member or owner. This glossary defines the key terms in plain language, with links to deeper explanations. Use it as a reference to decode the jargon in your reserve study and financial documents.
Core Reserve Terms
Reserve fund — the association's savings for major future component replacements (roofs, paving, etc.), separate from the operating fund. (What reserves are.)
Reserve study — the report that inventories major components, projects when they'll need replacement and what it will cost, and recommends a funding plan. (What a reserve study is.)
Operating fund — the money for day-to-day recurring expenses (utilities, landscaping, management), distinct from reserves. (Operating vs. reserves.)
Reserve contribution — the amount regularly transferred from operating (funded by dues) into reserves. (Calculating it.)
Funding-Status Terms
Percent funded — the key health metric: the actual reserve balance as a percentage of the "fully funded balance." Above ~70% is healthy; below ~30% is weak. (Percent funded explained.)
Fully funded balance (FFB) — the ideal reserve amount given the age and wear of components; the benchmark percent funded compares against.
Fully funded — reserves at or near 100% of the fully funded balance — every component fully pre-funded for its age. (Funding models.)
Baseline funding — keeping reserves above zero but with minimal cushion — the aggressive minimum. (Funding models.)
Threshold funding — keeping reserves above a chosen floor (e.g., 70% funded) — a middle-ground approach.
The 70% rule — the common benchmark that reserves above 70% funded are generally healthy. (The 70% rule.)
Component Terms
Component — a major element the association maintains and must eventually replace (roof, elevator, pool, etc.).
Component inventory — the list of all reserve components with their quantities, conditions, lives, and costs. (Building one.)
Useful life (UL) — how long a component lasts in total when new. (Useful life explained.)
Remaining useful life (RUL) — how much life a component has left before replacement.
Replacement cost — the projected cost to replace a component at the end of its life.
Study-Type Terms
Full reserve study (Level 1) — a complete study with on-site inspection, building the inventory from scratch. (Study levels.)
Update with site visit (Level 2) — updating an existing study with an on-site verification.
Update without site visit (Level 3) — a financial refresh of an existing study, no site visit.
Reserve specialist — a credentialed reserve study professional (e.g., RS, PRA designations). (Credentials.)
Funding-and-Finance Terms
Special assessment — a one-time charge to owners beyond regular dues, often to cover an underfunded major expense. (Special assessments.)
Funding plan — the schedule of contributions the study recommends to fund future replacements. (Funding methods.)
Cash flow method — a common reserve funding method that projects expenditures and sets contributions to keep reserves adequate over time. (Funding methods.)
Deferred maintenance — maintenance postponed past when it should be done, often accumulating into larger problems. (Deferred maintenance.)
Capital improvement — adding or upgrading beyond the original (vs. a replacement that restores the original). (Improvements vs. repairs.)
Regulatory Terms
SIRS (Structural Integrity Reserve Study) — Florida's required structural reserve study for certain condo buildings. (SIRS.)
Milestone inspection — a required structural inspection at certain building ages (e.g., in Florida). (Florida rules.)
Reserve waiver — where permitted, a vote to fund reserves below the recommended level (increasingly restricted post-Surfside). (Reserve waivers.)
Fiduciary duty — the board's legal obligation to act in the association's best interest, including prudent reserve stewardship. (Fiduciary duty.)
Financial-Statement Terms
Balance sheet — a snapshot of assets, liabilities, and fund balances at a point in time. (Reading it.)
Accrual accounting — recording transactions when earned/incurred (vs. cash basis, when money moves). (Cash vs. accrual.)
Reserve study assumptions — the inflation and interest-rate assumptions built into the study's projections. (Inflation and reserves.)
The Bottom Line
Reserve study terminology comes down to a manageable set of concepts: the reserve fund (savings for major replacements), the reserve study (the planning report), percent funded (the key health metric), the component inventory and its useful/remaining lives, the funding models (full, threshold, baseline), and the regulatory terms (SIRS, milestone, fiduciary duty). Keep this glossary handy when reading your reserve study or financial documents, and follow the links for deeper explanations. For the foundational concept, see What Is a Reserve Study?; for the key metric, Percent Funded Explained.