When the study applies
The duty applies when the current replacement value of the major components the association must repair, replace or maintain is at least half of the association's gross budget, leaving out the reserve contribution. A small townhome association with a $90,000 budget and $400,000 of roofs, paving and fences meets the test easily. Very few communities fall outside it.
The three-year inspection
At least once every three years the board must cause a study to be done that includes a reasonably competent and diligent visual inspection of the accessible areas of the major components. "Cause" matters: the duty stays with the board, which can and usually does hire a firm to carry it out.
Accessible areas means what can be seen without opening walls. Pipes inside walls, roof decks under tiles and the structure of a balcony are judged from age, history and what shows on the surface. That is one reason the separate balcony inspection under Civil Code 5551 exists.
The annual review
In each of the other years the board must review the study, or have it reviewed, and adjust the reserve analysis as needed. Costs change, a component wears faster than expected, a repair is done early. The review keeps the numbers in the budget report honest.
What the study must contain
- Each major component with a remaining useful life of less than 30 years.
- Its likely remaining useful life.
- An estimate of the cost to repair, replace, restore or maintain it during and at the end of that life.
- The total yearly contribution needed to cover those costs, after allowing for money already in reserves.
- A reserve funding plan that shows how the association will pay for the work.
From study to plan to owners
The funding plan has to show the date and amount of any change in regular or special assessments it relies on. The board adopts it at an open meeting (Civil Code 5560), and any increase still goes through the usual limits in Civil Code 5605. The results then reach owners twice: in the reserve summary of the annual budget report (Civil Code 5565) and in the one-page Assessment and Reserve Funding Disclosure Summary (Civil Code 5570).
Who may do the work
Section 5550 does not name a licensed profession. Many boards ask for a CAI Reserve Specialist (RS) or an APRA Professional Reserve Analyst (PRA), both credentials that require experience and continuing education. If the community has condominium balconies, the elevated element inspection is a separate job for a licensed structural or civil engineer or architect; see balcony inspections.
Read the section itself at Civil Code 5550 on leginfo.legislature.ca.gov. This page explains the law in plain terms; it is not legal advice, and governing documents can add to it. For a specific question, check with the association's attorney.