By Bri Yonkers & Joe Smith, Burg Simpson

No matter the age of a common interest community, an Association needs to plan and budget for the repair and replacement of major common elements to avoid finding itself without adequate funds when the time comes for expected, necessary maintenance, repair, or replacement. Associations that don’t plan AND budget properly will find themselves (1) having to special assess the owners potentially thousands of dollars to raise the funds, or (2) trying to obtain a loan to raise the funds in the short term, to be repaid with interest, or (3) foregoing timely maintenance/repair/replacement, effectively kicking the can down the road to future owners who will face the specter of paying an even higher cost.

This article has two parts. First, we provide an overview of what Reserve Studies are, how they are developed, and best practices for use by Association Boards and Community Managers. Second, we briefly discuss Reserve Studies in the context of construction defect litigation, where they may be raised by Defendants in an effort to support timing-based and other defenses.

Reserve Studies 101

No HOA board wants to be remembered for or have to navigate through the unexpected special assessment that caught homeowners off guard. However, without proper planning for the inevitable repair and replacement of community assets, even well-managed Associations can find themselves facing difficult financial decisions. That’s where reserve studies come in.

Reserve studies provide Associations with a strategic roadmap for funding future repair and replacement of major common area components, such as roofs, fencing, streets, elevators, clubhouses, and recreational amenities. They help boards meet fiduciary duties while protecting property values and community stability. One important consideration is understanding the difference between a full reserve study and an update to an existing study. 

A full reserve study typically includes an onsite inspection by a qualified reserve professional who evaluates the condition of Association assets, estimates their remaining useful life, and develops funding recommendations based on anticipated future expenses. These studies are especially beneficial for newer communities, Associations without a recent study, or those that have experienced significant changes to their assets.

Reserve study updates build on previous analyses by incorporating completed projects, changes in reserve balances, inflation, and updated cost information. Depending on the type of update, an on-site inspection may or may not be included. Regular updates help ensure that reserve funding plans remain aligned with the community’s evolving needs.

Reserve studies also evaluate an Association’s current reserve balance and future obligations, identifying its funding level and comparing it to recommended goals. Based on the results, the reserve professional may recommend increasing reserve contributions including the reserve portion of monthly assessments to help the Association reach a target funding level over time and reduce the risk of special assessments or deferred maintenance. 

To support consistency and industry best practices, reserve professionals often rely on the National Reserve Study Standards published by CAI. These standards establish common terminology, disclosure requirements, and methods that provide boards and managers with greater confidence in understanding and utilizing reserve study recommendations.

In the end, reserve studies are about more than preparing for future expenses, they are about preserving the financial health of the community. Whether through a comprehensive study or a timely update, proactive reserve planning today helps communities avoid surprises tomorrow.

Reserve Studies in the Construction Defect Context

Most reserve studies that we’ve reviewed wisely include clarifying language reflecting CAI’s National Reserve Study Standards’ presumption that the components being analyzed and budgeted for have been “properly constructed.” Clarifying language might read:

This Reserve Study assumes that all components for which the Association is responsible were constructed properly and are free of construction defects. Neither this Reserve Study nor our site observations are intended to or have identified the potential existence of construction defects. If construction defects are known or suspected, the Association should contact qualified legal counsel or a qualified forensic expert to advise the Association, which may include the performance of a separate Construction Compliance Study.

Aside from protecting reserve providers who may not have the training or experience to identify construction defects, this language can be crucial to an Association that subsequently pursues construction defect litigation. This is because Associations in Colorado may have just two years from the date a construction defect manifests to put the potentially responsible parties on notice of the defects and then initiate legal action if necessary.

A reserve study that does not include clarifying language like that above may be used by a construction professional’s defense attorneys to argue that conditions identified in the reserve study are defects that had manifested by the time of the reserve study investigation. If, as is often the case, the reserve study was issued to the Association years earlier, defense attorneys may argue the applicable 2-year time frame to pursue defect claims had passed by the time the Association began taking steps to pursue litigation. If successful, this argument can result in the dismissal of some or all of the Association’s defect claims.

Reserve studies that include clarifying language, on the other hand, make it difficult for defense attorneys to meet the relatively high burden required to establish that an Association’s defect claims are untimely. By making sure every post-turnover reserve study includes this kind of protective language, Board Members and Community Managers provide significant protection to their community in the event construction defects exist and warrant litigation.

2026 Colorado Reserve Study Legislation

On April 13, 2026, Governor Jared Polis signed HB26-1099. Effective August 12, 2026, HB26-1099 amends CCIOA and contains the following requirements, among others:

• Common interest community declarants, prior to turnover, must obtain a reserve study projecting the costs of maintaining, repairing, or replacing the common elements and any other property of the community, projecting costs over a 30-year period. 

• The reserve study provider cannot have a business relationship with, a financial interest in, or be an affiliate of the declarant.

• Within 60 days of turnover, the declarant must provide the reserve study to the Association.

• Within 90 days of turnover and within 90 days after the end of each fiscal year, the Association must make the most recent reserve study available to unit owners.

Despite the efforts of Colorado’s Legislative Action Committee, declarants are not required to fund reserves in accordance with the study they commission before turnover. HB26-1099 can be viewed and downloaded at https://leg.colorado.gov/bill_files/114514/download. 

About the Authors: Bri Yonkers, Marketing Director, Burg Simpson; Joe Smith, Construction Defect Attorney, Burg Simpson