The Ultimate Guide to Nevada HOA Reserve Study Compliance (NRS 116 & NRS 116A)

If you are an HOA board member, property manager, or reserve specialist operating in Nevada, you need to know this: Nevada has one of the country's most specific and strictly enforced laws regarding community association reserves. Compliance is not optional—it’s a mandatory fiduciary duty established in the Nevada Revised Statutes (NRS) Chapter 116.

This guide breaks down exactly what is required, how often it must be done, and the key compliance steps needed to protect your community.

Is a Nevada HOA Reserve Study Required? The Short Answer is YES.

In Nevada, reserve studies are mandatory for virtually all Common-Interest Communities (CICs), which include most Homeowners Associations (HOAs) and Condominium Associations (COAs). The law doesn't offer easy exemptions based on community size or age—if your association is responsible for common area elements, you are generally subject to the rules.

The goal of the law is clear: associations must maintain "adequate reserves". Legally, this means having enough funds to repair, replace, and restore major common elements without having to use operating funds or resort to a special assessment for components already identified in the study.

The 5-Year Onsite Cycle and Annual Review

Nevada law establishes a critical dual cadence for reserve planning:

1. The Full Onsite Study: Every 5 Years

The executive board shall commission a comprehensive study of the reserves at least once every 5 years .

Crucially, the 5-year compliance clock restarts on the exact date that the on-site, visual inspection of major components is performed. This means simply updating the financial data remotely (often called a Level III update) is

not sufficient to meet the 5-year mandate. The study must incorporate a physical inspection of components such as roofs, roads, HVAC, and building structures to legally reset the cycle.

2. The Annual Fiduciary Duty

Regardless of the 5-year cycle, the board has an annual responsibility:

• The board must review the most recent study annually to ensure the reserves are sufficient .
• The board must adjust required contributions (assessments) if necessary, factoring in current inflation and interest rates to keep the plan accurate.

Boards must also review the reserve account revenues and expenses, comparing them to the budget, at least once every quarter during an executive board meeting.

Who Can Perform the Reserve Study? Registration and Insurance Mandates

Nevada is unique because it regulates the profession. The person preparing your study cannot be just anyone; they must meet specific professional and financial requirements.

Mandatory Registration (RSS)

Except for limited statutory exceptions, the person who conducts the reserve study must be a registered Reserve Study Specialist (RSS) with the Nevada Real Estate Division (NRED) .

To qualify, the RSS must demonstrate specific competence in evaluating component deterioration, useful life, current costs, and the ability to perform the necessary financial analysis, including the mandatory 30-year projection.

The $1 Million Insurance Requirement

A key protection for associations: the registered RSS must maintain professional liability insurance or a surety bond with minimum coverage of $1,000,000. This high minimum acts as a financial safeguard for the association and owners in case professional negligence leads to a grossly inaccurate or deficient study.

Conflicts of Interest

The RSS must disclose in writing any actual, potential, or perceived conflict of interest that they have with the association or any related parties (like vendors) . This ensures the specialist remains independent and objective.

What Must Be in the Reserve Study Report?

The law prescribes specific content to ensure accuracy and transparency:

• 30-Year Projection: The study must include a financial analysis covering a minimum of a 30-year projection of capital expenditures and funding.
• Component Inventory: A detailed assessment of all major common area components the association is responsible for maintaining, repairing, or replacing.
• Financial Assumptions: The report must explicitly disclose the source and rates used for interest and inflation rate assumptions in the projection . This allows the board and owners to evaluate if the funding plan is based on realistic economic forecasts.
• Source Data: The method used for determining component lives and replacement costs, based on industry data, must be documented .

Reserve Funding and Strict Usage Rules

Nevada imposes clear rules on how reserve funds are established and spent:

Using Reserve Funds: Only for Reserves

Reserve funds may be used only for the purposes identified in the reserve study—which means repairing, replacing, or restoring major components (e.g., roofs, roads, sidewalks) .

They must not be used for daily maintenance . Misusing reserve funds to cover operating shortfalls is a serious breach of fiduciary duty and must be explicitly disclosed in the annual budget.

Board Authority to Levy Special Assessments

To maintain "adequate reserves" , the executive board has the authority to impose a reasonable

special assessment against units for a set period, provided that assessment is explicitly based on the findings of the reserve study. This power is designed to ensure financial health quickly, even without a unit owner vote, if the objective data from the study requires it.

Disclosure, Penalties, and External Risk

Nevada's compliance framework is backed by specific administrative penalties and affects property marketability.

Reporting to the State (NRED)

The board must submit a summary of the adopted reserve study to the Nevada Real Estate Division (NRED) not later than 45 days after the executive board formally adopts the results of the study .

Financial Penalties for Disclosure Failure

Boards that fail to provide required documents (including the budget or reserve study) to owners upon request within the required timeframe risk administrative action. The Commission may impose a penalty of $25 for each day the records were not provided timely.

Impact on Financing (Fannie Mae/Freddie Mac)

Compliance with NRS 116 is crucial for property values. Major lenders, like Fannie Mae, often allow a compliant reserve study to be used in lieu of the standard 10% replacement reserve requirement for project eligibility . If the association's 5-year study is expired or deemed inadequate, it can severely restrict a unit owner's ability to finance or refinance their home .

What’s Next? The Legislative Horizon

While Nevada does not currently have the kind of mandatory structural inspection laws seen in states like Florida , the legislative interest in reserve stringency remains high.

A notable recent effort (SB 56) proposed increasing the reserve study requirement from every five years to annually. Although the bill did not pass, it signals a strong legislative appetite for greater financial oversight and higher frequency of assessment. Boards should maintain close awareness of pending legislative sessions and administrative regulation changes, as the current 5-year cycle is likely to be viewed as the bare minimum required by law.

Action Plan: Your Compliance Checklist