By Bryan Farley, Association Reserves, CO 

You may have heard the phrase "if it ain't broke, don't fix it" when it comes to tinkering around some appliance or vehicle. As soon as you start to tinker around, something else breaks, and it ends up costing you more money to fix your mistake (not that I know from experience). You may have experienced this when your family has an ancient refrigerator that still runs, or the original air conditioner that ‘sometimes’ works in the summer, but the replacement quotes to replace it make you wonder if 85 degrees in your home really isn't ‘that bad’. 

While this type of reasoning may work for an individual, it does not work with a community’s collective components. 

"If it ain't broke, don't fix it" is also known as a cognitive bias. This is a bias that prefers the current state and resists change, even when change could be beneficial because a way of doing something has worked in the past. 

For example, you may be able to recognize this when you hear an owner say:

“In my five years as HOA President, I am proud to say we haven’t raised the dues once!

Or

“We always just special assess when a project is due, everyone knows that.”

Or

“We never have had to special assess our owners in the past, and I doubt we ever will.”

These may seem like hyperbole, but it is unfortunately relatively common. For example, we all know that just because we haven’t changed our car oil in the last six months, that does not mean we will not need to change our oil at all. 

Yet, when it comes to a community that shares the same roofs, siding, mechanicals, etc., there is a collective shrugging of the shoulders when the time comes for the regular and expected maintenance and replacement of the common area components. 

What should we do? 

Just like that blinking radar speed limit sign that displays how fast a car is driving causes drivers to slow down, an annual Reserve Study that is presented to the owners each year publicly displays to the owners of their collective financial obligations and expenses.

You can lead a horse to water but cannot make it drink. However, if that horse does not drink the water, pretty soon you are beating a dead horse. An annually updated Reserve

Study is the way the board can consistently and calmly bring the ‘horse’ to water. If the board discloses the updated Reserve Study each year, the community is more likely to complete projects on time, meet the project budget costs and timelines, avoid special assessments, as well as satisfy the guidelines provided by FHA, Freddie & Fannie, and GAAP. 

• The American Institute of Certified Public Accountants (AICPA) and the Generally Accepted Accounting Principles (GAAP) for Associations recommend annual Reserve planning as part of the budget planning and financial reporting process.

• Fannie Mae and Freddie Mac have updated their condo guidelines recommending updated Reserve Studies prepared by an independent expert to ensure adequate funding for capital repairs. 

• Colorado Law requires that Colorado HOAs disclose how often a Reserve Study will be completed as part of the Reserve Study policy. 

Completing Projects on Time 

When a community does not complete a project on time, it will lead to deferred maintenance. Deferred maintenance occurs when each year, rather than completing a project, the project is tabled for another year, then another, then another, etc. 

An annually updated Reserve Study will remind the board that these costs cannot be ignored. 

For example, when a wood painting project is deferred because the owners believe that the paint looks ‘good enough,’ the owners may end up spending more money on the siding due to inflationary pressure (add 5%-10% each year for painting) as well as scope of work increase (not painting the siding causes premature deterioration). 

Inflation is not slowing down, in fact, in 2025 the Denver metropolitan area experienced some of the highest construction cost inflation in the United States. In 2025, the Mortenson Cost Index tracked an increase of ~7.5%.

Each year a project is deferred the cost will increase by at least 3%, and most likely more. The increases mean that the owners will pay an increase for the same exact project due to indecisiveness. 

It is not just inflation. Remember that each year a project is deferred, the component is aging and experiencing more deterioration. For example, a seal coating project that was deferred a few too many times, may turn into a full depth reclamation project. Turning a $0.30 per square foot project into a $6.00 per square foot project. 

An updated Reserve Study reminds the owners each and every year of the costs that continually go up. This helps encourage the owners to make a budget decision and not put their collective heads in the sand. 

Hitting the Project Budget Costs and Timelines

An annually updated Reserve Study will track local pricing fluctuations so that budgeted projects are not a surprise. Every so often, an owner will give us a call after they have reviewed a Reserve Study from five years ago and question why the estimated cost in the Reserve Study for the roof replacement is 25% below their current roofing bid. 

A good way to frame why this happens is to imagine receiving a bid proposal from a roofing contractor in early 2020 and then calling that same contractor in 2025 asking if the community can move forward with the 2020 proposal. No roofing contractor would honor a price from five years ago, let alone one year ago. Similarly, the Reserve Study is using current estimates as of the fiscal year it was created in. 

The costs included in the Reserve Study are based on the current estimated costs for the project. The Reserve Study then applies a simple 3% inflation rate to the components over a 30-year timeline. However, the 3% represents the purchasing power of the association’s Reserve account balance, not what the expected inflation will be on a certain component. 

As previously mentioned, in 2025 alone, Denver construction costs increased by about 7.5%, but CPI (Consumer Price Index) is currently 2.5%. CPI is tracking food, energy, housing, transportation, medical care, and clothing. It is not tracking shingle roofing, elevator modernization, and asphalt seal coating. 

This is why an updated Reserve Study is an essential tool for a board to utilize. The Reserve Study will track the local market for the items that are unique to a specific property and make the funding recommendation to properly fund those components. 

Avoiding Special Assessments

An annually updated Reserve Study helps reduce Special Assessment risk. Assume that the board of directors reviewed the budget for the community every three to five years. Would the budget be accurate? Would the landscaping costs or the management fees be the same today as they were in 2020? Probably not, and neither will the Reserve Study project estimates if it was last completed in 2020.

This is most likely why we find that when a board updates a Reserve Study annually, there is a lower risk of special assessments. The more frequently a Reserve Study is updated, the lower the special assessment risk becomes. The costs for the projects in the Reserve Study are tracked annually, the board then has the ability to correct its course annually, and the home owners benefit from the prudent planning of the board. 

Best Practices

An annually updated Reserve Study is best practice for community associations. This is not just an opinion from a Reserve Study company, rather other industry professionals make the same recommendation. 

An updated Reserve Study will put the community’s finances front and center during the annual meetings. If a homeowner questions why the dues are rising, a board member can calmly point to the updated Reserve Study and show that the community is at risk for a special assessment. A Reserve Study will remove the board’s anxiety of angry pointed fingers during a meeting, and instead the board can point to a credentialed Reserve Study and show the owners what projects are coming up, the price increases of those projects, and the current trajectory the community is on. 

Next time an owner suggests that there is no need to paint the siding since it ‘looks good enough to me,’ - show them the updated Reserve Study, and explain to them that spending the money now, saves the community money next year by avoiding special assessments, avoiding deferred maintenance, and satisfying the industry best practices. 

About the Author: Bryan Farley is the President of Association Reserves, CO and has completed over 3,000 Reserve Studies and earned the Community Associations Institute (CAI) designation of Reserve Specialist (RS #260). His 15+ years of experience includes all types of condominium and homeowner associations throughout the United States, ranging from international high-rises to historical monuments.