By Prerna Kapoor, CLHMS | REAL Brokerage | May 17, 2026
Quick answer: A reserve study is the HOA’s professional assessment of long-term capital needs (roof, elevator, paint, parking lot, boiler) and how well-funded the reserve account is to cover them. A reserve account that is less than 30 percent funded is high risk for special assessments. Above 70 percent is strong. Colorado’s HB22-1137 requires reserve studies every 5 years for many HOAs as of 2022. Before you close on any Colorado condo, request the most recent reserve study, the last 3 years of HOA financials, the current reserves balance, and a list of past special assessments. Lender requirements got stricter after the Surfside, Florida collapse in 2021.
I had a buyer two years ago who was about to close on a beautiful condo in the Cherry Creek area. Great unit, great views, HOA dues that felt reasonable at $385 a month. We requested the resale documents during due diligence and the reserve study came back at 22 percent funded with a roof and parking deck both nearing end of life. We did the math: she was looking at a likely $12,000 to $18,000 special assessment within three years. She walked. Six months later, the building’s residents got hit with a $15,400 per-unit assessment. The numbers had been in the documents the whole time.
Most buyers in Colorado do not know to ask for these documents, and when they get them, they do not know what to read. Here is what changed after Surfside and what you owe yourself before signing.
What a reserve study actually is
A reserve study is a professional engineering and financial report commissioned by the HOA. A reserve specialist (often credentialed through the Community Associations Institute, the CAI) walks the property, documents every major component with a finite life, estimates its current condition and remaining useful life, and projects what it will cost to replace each item.
The major components on the list for a typical Colorado condo building include: roof, exterior paint and siding, parking lot or garage deck, elevator, boiler or chiller, common-area HVAC, pool and pool equipment, fitness center equipment, fencing, landscaping irrigation, balcony waterproofing, and any structural items the engineer flags.
The study then projects forward 20 to 30 years and calculates the year each component will need replacement and the cost. Compared against the current reserve fund balance and the annual contributions, the study calculates a percent funded number. Above 70 percent is generally considered strong. 30 to 70 percent is the gray zone. Below 30 percent is high risk for special assessments because there is not enough cushion to absorb a major capital project.
Why Colorado HB22-1137 changed everything in 2022
Free Colorado Real Estate Guides
Prerna's no-fluff buyer & seller playbooks — built from real Colorado deals.
Or ask Prerna’s assistant a question directly — chat icon, bottom right.
Before 2022, Colorado HOAs were not required to commission reserve studies at all. Many small associations skipped them entirely. After Champlain Towers South in Surfside, Florida collapsed in June 2021 killing 98 people, Colorado lawmakers passed HB22-1137 (the Colorado Common Interest Ownership Act amendments).
Effective for fiscal years beginning on or after January 1, 2023, the law requires most Colorado HOAs to commission a reserve study every five years (with annual updates for larger associations), and to share the study with owners and prospective buyers on request. Some smaller associations are exempt, but the trend across Colorado is now that reserve studies exist and are accessible.
This means that if you are buying a condo today and the seller cannot produce a reserve study, that is itself information. Either the building is too small to require one, the HOA is out of compliance, or the seller is not requesting it. None of those is comforting.
What to request during your inspection period
You have a window during the Colorado contract to review the resale documents (HOA disclosures). Use it. Request all of the following:
The most recent reserve study and any updates. Read the executive summary and the percent funded number. Skim the component list for anything nearing end of life.
Last 3 years of HOA financials. Income statement and balance sheet. Look for whether reserves are growing or shrinking year over year. Look at the operating budget for unusual line items.
Current reserve account balance. Hard number, not a percentage. Compare it to the projected needs in the reserve study.
List of all special assessments in the last 10 years. Pattern matters. One special assessment in a decade may be a planned project. Three special assessments in five years means the HOA is chronically underfunded.
Current insurance certificate for the master policy. Check that the master policy is current and covers what it should (typically the building exterior, common areas, and walls-out for individual units).
Minutes from the last 12 months of HOA board meetings. Boring reading, but this is where you find out what the board is actually worried about. Look for discussions of deferred maintenance, contractor bids, owner complaints, lawsuits, and any conversations about future assessments.
Litigation disclosure. Is the HOA currently a party to any lawsuits? Active litigation can make lenders nervous and can drain reserves through legal fees.
Rules and bylaws. Confirm what you can and cannot do (pets, rentals, modifications). Some Colorado HOAs have restrictive short-term rental rules that may matter if you ever want to do furnished rentals or move out without selling.
Red flags that should slow you down
If you see any of the following in the resale documents, ask more questions before you waive your inspection contingency.
An aging building (more than 20 years old) with reserves under 30 percent funded. The maintenance bill is coming. The only question is when and how much.
Deferred maintenance noted in the reserve study. Reserve specialists will sometimes flag items where the HOA has not done recommended work. Deferred deck waterproofing, deferred elevator modernization, deferred roof patching: each of these is a cost that has been pushed forward but not eliminated.
Frequent special assessments in the last 5 years. Two or more is a pattern. Ask the listing agent for documentation of each assessment, what it funded, and whether the work was completed.
Dropping reserve balances year over year. If the reserve account had $400,000 three years ago and has $180,000 today with no major project completed, something is wrong. Money is going out faster than it is coming in.
Annual dues that have not increased in 5+ years. Sounds like a positive. It is not. Construction costs have gone up 25 to 35 percent in Colorado since 2020. An HOA that has not raised dues to keep pace with inflation is silently underfunding its reserves, and the catch-up assessment is coming.
Pending litigation against the HOA. Especially construction defect lawsuits, which can drag on for years and absorb significant legal costs.
How lender requirements got stricter after Surfside
After the Champlain Towers collapse, Fannie Mae and Freddie Mac both rolled out new requirements for condo financing. As of 2022-2023, condos with significant deferred maintenance or insufficient reserves can be placed on a non-warrantable list, which means most conventional lenders will not finance the loan.
The lenders now request a condo questionnaire from the HOA before they will fund. The questionnaire asks about: percent of units that are owner-occupied versus rented, any single owner who controls more than 10 percent of units, pending litigation, deferred maintenance, insurance coverage, and reserve funding levels.
If your lender comes back and says the building is on a non-warrantable list, you have three options: switch to a portfolio lender (smaller bank or credit union that holds its own loans), pay a higher rate, or walk from the deal. This is a real risk worth knowing about before you fall in love with a unit.
To give you a sense of the other side, a strong building looks like this in the documents: reserve study from the last 3 years showing 60 to 90 percent funded, reserves balance growing year over year, annual dues that step up modestly each year to keep pace with inflation, one or fewer special assessments in the last 10 years (and the one was for a planned major project like elevator modernization), no active litigation, master insurance current with reasonable deductible, HOA board minutes showing active conversation about future capital projects and how they will be paid for. Buildings like this exist in Colorado. They are usually run by a professional management company with a board that takes the work seriously.
A condo with strong governance and well-funded reserves is not just a safer investment. It also resells more easily later because future buyers will go through this same process and find a clean paper trail.
If you are looking at a condo this spring and want a second set of eyes on the resale documents, I am happy to walk through them with you. Reading reserve studies is not glamorous work, but it is one of the highest-value 30 minutes you can spend before signing a contract on a building you cannot inspect by yourself.
Prerna Kapoor | REALTOR® | Luxury Home Specialist
REAL Brokerage | 720-949-5450 | info@prernakapoor.com
CLHMS • RENE • PSA • ABR | International Sterling Society Award Winner
Prerna specializes in residential real estate across Parker, Aurora, Lone Tree, Castle Pines, Highlands Ranch, Cherry Creek, Greenwood Village, and Centennial. She speaks English, Japanese, and Hindi.
