Oregon Condominium Reserve Study Rules

The reserve account

The association must hold a reserve account for major maintenance, repair or replacement of common elements that will normally need it in more than one year and less than 30 years. Exterior painting goes in too, if the association is responsible for it, along with anything else the declaration or bylaws require.

Two things may be left out: items that can reasonably be paid for out of the general operating budget, and limited common elements that owners maintain themselves under the declaration. A balcony membrane the owner must keep up, for example, may not belong in the association's reserve; the same membrane maintained by the association does.

The declarant sets the reserve part of the first assessment, and reserve assessments accrue from the conveyance of the first unit. They belong to the association. An owner who sells does not get their reserve contributions back.

The first study belongs to the developer

ORS 100.175 puts the first reserve study, the first maintenance plan and the opening of the reserve account on the declarant, acting on the association's behalf. If you are a manager taking on a newly turned-over condominium, ask for all three among the turnover documents. A board that cannot find them should treat getting a full study as an early job.

The study every year

The core duty is in subsection (3). Each year the board must determine the reserve account requirements by conducting a reserve study or by reviewing and updating an existing one. The statute lists what the study has to take into account:

• the reserve balance at the start of the current fiscal year;
• the estimated remaining useful life of each item;
• the estimated cost of maintaining, repairing or replacing each item at the end of its life;
• the inflation rate for the current fiscal year; and
• the returns on invested reserves.

After the review, the board may adjust the reserve assessment without a vote of the owners. In practice that is why the timing matters: a review finished before the budget is drafted can go straight into the next year's assessment.

The statute does not demand a site visit every year, and it does not say who must do the work. Many associations alternate: a full study with a site visit, then desk updates, with a site-visit update every few years. Our page on the annual review sets out a workable cycle, and the cost page shows what each kind of study usually costs.

The maintenance plan

Alongside the study, the board must prepare a maintenance plan and review and update it as necessary. The plan describes the maintenance, repair and replacement the association will carry out, includes a schedule, should suit the size and complexity of what the association looks after, and should address warranties and useful life, among other things. See the maintenance plan for how to put one together.

Which condominiums are exempt

The study and plan requirements do not apply to a condominium of one or two units, not counting units used for parking, storage or other uses ancillary to a unit. There are limits: a flexible or staged condominium created on or after September 27, 2007 that could later grow beyond two units does not get the exemption. For a condominium recorded before October 23, 1999 whose documents call for a reserve, the study and plan rules start when the board adopts a resolution or receives a petition signed by a majority of owners, and the study and plan must then be finished within a year.

Using and borrowing the reserve

Reserve money may be used only for the purposes the reserve exists for, and it must be kept separate from other funds. After the turnover meeting, the board may borrow from the reserve to meet high seasonal demands on the regular operating fund or to meet unexpected increases in expenses, but only under a board resolution (which can be an annual continuing one) and with a written plan, adopted by the time the next budget is, to repay the money within a reasonable period. Because the conditions are specific, confirm any loan with the association's attorney first.

Can funding stop?

Not easily. Neither the board nor the owners may vote to eliminate required reserve funding unless the board finds, through the yearly review, that the account will be adequately funded for the following year. After the turnover meeting, the board may elect not to fund the reserve for the next year, but only with the approval of all owners, and only one year at a time.