National Reserve Study Standards: What CAI Requires and What Changed in 2023

Every reserve study proposal says the study is "prepared to CAI standards." Very few explain what that means. The National Reserve Study Standards are the document that defines it: what a study must contain, how components are chosen, how the funding plan is built, and who is qualified to prepare it.

Community Associations Institute (CAI) first published the standards in 1998 and released a full revision in July 2023. If your last study predates that, here is what changed and what to check for.

What the National Reserve Study Standards are

The standards are CAI's minimum requirements for preparing a reserve study. Their purpose is consistency: two qualified providers looking at the same community should select similar components and reach similar funding recommendations.

They are not law. In practice, though, they are the benchmark. State legislation in Florida, Colorado and New Jersey borrows its terminology from them, lenders and auditors expect studies to follow them, and the Reserve Specialist (RS) designation requires providers to work to them. Where state law sets a higher bar, the law wins. The standards are the floor.

The four levels of service

The most useful thing the standards do is define what kind of study you are buying.

Level I, Full

A complete study built from the provider's own site visit, covering all five core tasks: component inventory, condition assessment, life and valuation estimates, fund status, and funding plan.

Level II, Update with site visit

All five tasks again, based on a fresh site visit. Quantities are confirmed rather than re-measured, new components within the 30-year window are added, and condition and remaining life are reassessed.

Level III, Update without site visit

A desk update of the life and valuation estimates, fund status and funding plan, using information from the association. Fine between site-visit years, but it inherits whatever was wrong in the last study.

Level IV, Preliminary

Prepared before a community is built, from design documents, mainly for developer budgeting.

Best practice under the standards is a site-visit-based update at least every third year; our post on how often to update a reserve study covers where states require more. When comparing proposals, check which level each one quotes. A cheaper bid is often a Level III where a Level II was needed.

How components are selected

A component only belongs in a reserve study if it passes a three-part test:

1. The association is responsible for maintaining or replacing it.
2. The need and timing can be reasonably anticipated.
3. The cost is material, can be reasonably estimated, and includes all related costs.

The 2023 revision widened what counts. Components no longer have to be physical objects or cyclical replacements: professional inspections, corrective work identified by a structural inspection, and upgrades to obsolete systems all qualify. Long-life components (more than 30 years of remaining life, such as foundations) must now be listed in the inventory even if they are not yet being funded.

The three funding goals

Every study has to state which funding goal it is built around. The standards define three, from most aggressive to most conservative:

• Baseline funding: the reserve balance is allowed to approach zero but never drop below it. The standards explicitly say this is not recommended as a long-term plan.
• Threshold funding: the balance is kept above a chosen dollar amount or percent-funded level. Stronger or weaker than full funding depending on where the threshold is set.
• Full funding: reserves are kept at or near 100 percent funded.

If your report does not name its funding goal, that is a gap. It is one of the three most important figures in a reserve study and the context needed to read your percent funded correctly.

What a compliant report must contain

At minimum, the report should include:

• A summary of the community (units, physical description, current reserve balance)
• A full component table with quantities, useful life, remaining useful life and current replacement cost
• The methodology, funding goal and fiscal year used
• A summary of the preventive maintenance discussion with the board
• A summary of any periodic structural inspection reports, or a note that none exist
• The level of service the study was prepared to

Required disclosures include whether the provider walked every common area or a sample, the inflation and interest assumptions, the provider's credentials, the dollar threshold below which projects go to the operating budget, and any conflicts of interest. A report missing several of these was not prepared to the standard, whatever the proposal said.

What changed in 2023

The revision followed the 2021 Champlain Towers South collapse in Surfside, Florida, and the changes fall into three groups.

Maintenance is now part of the study

Providers must ask whether a preventive maintenance plan is in place and disclose the answer. If maintenance is not being performed, remaining useful lives should be reduced, which changes the funding plan.

Structural inspections are recognized

Periodic structural inspections are recommended for buildings with major structural elements, and the study must include their cost and frequency plus any corrective work they identify. This is the national version of what Florida has since made law through the Structural Integrity Reserve Study requirement.

Definitions were tightened

Adequate reserves, life cycle cost, the three maintenance types and the long-life component rules were defined or clarified so providers and boards share a vocabulary.

Why it matters who prepares your study

The standards name a Reserve Specialist as the most qualified person to prepare a study and set a standard of care RS holders agree to work to. Anyone can produce a spreadsheet of components. A study prepared to the National Reserve Study Standards by a designated RS is one a lender, auditor or future buyer can rely on.

Every study we prepare follows the 2023 standards. You can see what that looks like on our reserve study report page, or request a proposal if your last study predates the update.

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