What Rhode Island Law Says About Reserve Studies

Rhode Island law doesn’t just suggest financial planning for HOAs and condo associations, it requires it. Yet many board members still wonder: What exactly are the state’s requirements for reserve studies?

At Hennessy Reserve Partners, we guide associations of all sizes across Rhode Island through the process of compliance and long-term capital planning. Here’s what every board should know.

What Rhode Island Law Says About Reserve Studies: Understanding Rhode Island’s Legal Framework

Under the Rhode Island Condominium Act (R.I. Gen. Laws §34-36.1), associations must establish adequate reserves for future capital expenditures and major repairs. Even though the law doesn’t explicitly mandate the completion of a “reserve study,” it does require boards to ensure reserves are “sufficient” to meet anticipated needs. A reserve study is the only credible way to prove that.

In short:

• Rhode Island law requires financial preparation, not guesswork.

• A professional Rhode Island Condo Association Reserve Study is the standard method used to determine what’s “adequate.”

• Boards that fail to document their reserve planning process can face liability risks, higher insurance premiums, or even special assessments down the road.

Avoiding Legal Trouble Through Planning

A mid-sized Providence condo association was accused of “negligent management.” Owners were frustrated by constant special assessments. After completing a Reserve Study in Rhode Island, the board discovered that years of underfunding stemmed from outdated estimates and missing reserve categories.

With an updated Physical vs. Financial Analysis in Reserve Studies, they created a transparent funding plan that satisfied their attorney and the state’s reserve adequacy expectations. Within a year, they had restored owner confidence and stabilized fees without another special assessment.

The Difference Between Reserve and Operating Budgets

One of the most common points of confusion among boards is the Difference Between Reserve and Operating Budgets.

• The Operating Budget covers day-to-day expenses like landscaping, insurance, and snow removal.

• The Reserve Budget funds long-term capital projects like roofs, siding, elevators, and pavement.

Understanding this distinction is crucial to comply with state expectations and demonstrate fiscal responsibility.

What’s Included in a Rhode Island Reserve Study?

A well-executed study evaluates the Reserve Studies Components specific to your community, including:

• Physical Analysis: Evaluating common elements like roofs, decks, HVAC systems, and parking lots.

• Financial Analysis: Projecting future repair and replacement costs, and calculating contribution rates.

Together, these elements form the foundation of responsible capital planning that aligns with state law.

When to Update Your Reserve Study in Rhode Island

Even though Rhode Island doesn’t specify how often reserve studies must be done, industry best practices and most insurance providers recommend updating them every 3 to 5 years.

Clients in Narragansett and East Greenwich who chose to Update Their Reserve Study in Rhode Island found that new inflation data and updated cost projections saved them thousands in misallocated funds.

An outdated study can leave your association vulnerable, especially as construction costs and interest rates change.

Why Reserve Studies Help Avoid Special Assessments

Every board dreads issuing a surprise special assessment. Proper planning through Reserve Studies in Rhode Island helps associations avoid that scenario entirely.

When one South County HOA faced a large pool repair, their proactive study (completed just a year earlier) gave them a roadmap to use existing reserves instead of issuing a mid-year assessment. This was a huge win for both the board and residents.

Reserve Studies Help Avoid Special Assessments by identifying upcoming expenses years in advance and ensuring predictable contributions from all owners.

Do Small Associations Need a Reserve Study?

Yes. Even smaller communities are subject to the same legal and financial principles. In fact, Do Small Associations Need a Reserve Study? is one of our most common Reserve Studies FAQs.

A 6-unit condo in Bristol learned this firsthand. They believed they were “too small” for a formal study until a roof replacement depleted their entire operating account. 

Small associations have less room for error, making professional planning even more critical.

Avoiding Common Reserve Study Mistakes

Even well-intentioned boards can make errors when navigating Rhode Island’s requirements. Here are a few Common Reserve Study Mistakes we see:

• Failing to separate operating and reserve funds.

• Relying on outdated or incomplete data.

• Not reviewing the reserve plan during annual budgeting.

• Using “rule of thumb” percentages instead of professional analysis.

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Partnering with a local Rhode Island reserve study provider ensures compliance, accuracy, and peace of mind.

Key Takeaways

It's important to understand what Rhode Island law says about reserve studies. To sum it up:

• Rhode Island law requires associations to maintain adequate reserves for future expenses.

• A reserve study is the best way to prove compliance and avoid legal exposure.

• Updating your study regularly keeps you financially prepared and legally sound.

• Even small associations benefit from having a professional plan.

At Hennessy Reserve Partners, we provide expert Reserve Studies in Rhode Island to help associations stay compliant, plan confidently, and protect their communities from costly surprises.

Ready to Get Started?

Schedule your consultation today and learn how a professional reserve study can safeguard your community’s financial future.

Contact Hennessy Reserve Partners for more information or to request a quote.