NRS 116 reserve study law

One section of Nevada's common-interest community statute, NRS 116.31152, sets the reserve study duty for HOA and condo boards. Here is what it requires, section by section, and what it leaves to the board.

Source: the Nevada Legislature's NRS chapter 116. General information, not legal advice.

The duty sits with the executive board

Under NRS 116.31152(1), the executive board of the association must do three things. It must cause a study of the reserves to be conducted at least once every five years. It must review the results of that study at least once a year. And it must make any adjustments to the association's funding that it decides are needed to provide adequate reserves.

The study covers the money needed to repair, replace and restore the major components of the common elements, and any other part of the community the association is obliged to maintain. If your declaration makes the association responsible for walls, roofs or private streets outside the common elements, those belong in the study too.

The study is a five-year task. The review is a yearly one. Boards that treat them as the same thing usually miss the second.

The five-year study

Five years is the outer limit, not a target. A board can order a study sooner, and a large project, a change in the component list, or a sharp change in costs is a good reason to. Note the date the last study was completed in your records, and count from that date.

The statute expects the study to rest on an inspection. Subsection 3 asks for a summary of an inspection of the major components. In practice that means the five-year study is a site-visit study. A desk update with no visit is a sensible tool for the years between, but if you plan to use one as the five-year study, check with the association's attorney first.

The yearly review

Each year the board looks at the study's results and asks whether reserves are sufficient. That review can be done by the board and the manager. It is the moment to compare actual spending against the study, move components whose timing has changed, and set the reserve contribution in the coming budget. Minute the review, even when the answer is "no change".

Many boards hire their provider for a no-visit update in some of the in-between years. The law does not require it, but it keeps the figures current in years when construction costs move quickly.

Who may conduct the study

NRS 116.31152(2) says the study must be conducted by a person who holds a permit issued under chapter 116A of NRS. The Real Estate Division issues those permits and lists holders on its license lookup. This is unusual: most states set no rule at all on who prepares a reserve study.

What the study must contain

NRS 116.31152(3) lists the contents. Read the statute itself for the exact words; in plain terms the study must include:

Item	What to look for in the report
Inspection summary	Who inspected, when, and what condition each major component was in.
Component list	Every major component with a remaining useful life of less than 30 years.
Remaining life	An estimate for each component on the list.
Cost	The estimated cost to repair, replace or restore each component at the end of its life.
Annual amount	The yearly contribution needed to cover those costs, worked out without counting reserves already in the bank.
Funding plan	An estimated plan for funding the reserves, under NRS 116.31152(3)(f). Check that it is a year-by-year schedule, not a single figure.

The 30-year window matters in the desert. Components with short lives in strong sun, such as seal coats, paint and pool plaster, will come round several times inside it, and each cycle should appear in the projection.

Who sees the results

The Real Estate Division collects a summary of each study on Form 609. The form sets out what to report and when; use the current version from the Division's site. Owners see reserves through the budget: NRS 116.31151 requires the board to send owners a summary of the reserve budget with the annual budget, including the current replacement costs, the reserves on hand and the plan for funding them.

Points to check with the association's attorney

Whether your community is small enough, or limited enough in purpose, to fall outside parts of chapter 116.
The exact filing deadline for Form 609 that applies to your study.
What to do if the last study is more than five years old, and how to record the catch-up in the minutes.
Whether a time-share or mixed-use project falls under a different chapter.

Next: what a study costs on the reserve study price page, or go back to the Nevada reserve study overview and its component chart.

Sources for this page