Your Information Center

Welcome to the Merion Station’s Information Center — your go-to hub for community resources, important documents, and helpful links tailored to residents of the Merion Station Townhouse Association. Here you’ll find key information that supports everyday living, from association updates to local laws and guides. Check back often as we continue to add new resources designed to keep you informed and connected with what matters most in our community. Thank you.

Reserve Fund FAQs

What is a Capital Reserve Study and why is it required?

A reserve study is a budget planning tool used by Associations to create an effective funding plan for anticipated common area expenditures over a period of time. The Reserve Study typically consists of two parts: a physical analysis and a financial analysis.

The Maryland legislature passed a law in October 2022, that required all condominium and townhouse associations conduct a Reserve Study. 

What is the purpose of a Reserve Study?

The purpose of a reserve study is to determine the amount of annual assessments that should be placed into a reserve account to pay for future repair or replacement of the  common areas for which the association is responsible, such as sidewalks, stormwater management facilities, trees, landscaping, etc. A normal useful life, or “life expectancy,” is assigned to each of these components (e.g., a 25-year roof), as well as an estimated cost to repair or replace those components at the end of their useful life. Based on these projections, a reserve analyst estimates the amount of money that the townhouse association should allocate to its reserve account each year so that the necessary funds will be available for future repairs and replacement.

Did the Merion Station Townhouse Association conduct a Reserve Study? If so, when?

Yes, Becht Engineering, of Woodstock, MD, conducted a Reserve Study of Merion Station on November 21, 2023. The project number is 23-1358, and you can view the study here.

What percent of the Reserve Fund was funded at the time the Study was conducted?

At the time of the report, the balance of the Reserve Fund was $26,800.00 Per the Study, this was 19.76% of the fully funded balance. The Study determined the fully funded balance was $135,649.00.

How was this Study conducted? (i.e. what was the methodology)

The study relied on information provided by the HOA Board, which included (at the time), the current asset balance of the Reserve Fund and the ages of the common areas/elements, as well as the dates of most recent replacements. Becht Engineering reviewed the master deed and offering statement to identify the common element components that the Association owns. Quantities of the components to be included in the reserve fund were then determined by field measurements and a review of building and site plans. Estimates of the costs to replace each component were derived from published industry standards. Finally, estimated remaining lives were determined for each of the included components based on the reported or evident present age, available industry data, as determined by their physical inspection.

What common areas/elements did the Study examine?

The Study reviewed the asphalt paving parking bays (overlay of the asphalt parking bays located along all the streets), community signage, and concrete curbing.

Does this Study include annual maintenance for the common areas?

No. The Capital Reserve Fund is not intended to cover annual maintenance. Expected lives, as determined by the Study, were based on the assumption that proper annual maintenance is being performed. Without proper maintenance, accelerated deterioration should be expected. The Study explains that the reserve fund for future expenditures and that a current need must be financed separately by assessments.

What did the Study determine?

The Study provided two Capital Reserve calculations.  First, the “Component Method,” analyzes each component individually and assumes that the money collected for each item will only be used to replace that item. Per Becht Engineering, that is the most conservative approach to calculating the reserve requirement.  Using the component method, Becht Engineering determined the Basic Annual Contribution (for the community as a whole) should be $9,027.00. The deficit will be offset on an annual basis for each reserve component, based on the remaining lives. The total of the Contribution Adjustment is $22,970.00. This results in a Total Contribution to the reserve fund for the budget year of $31,996.00.

The “Threshold Funding Method,” pools all the components and assumes the money contributed to the fund is available for replacement of any item. Per Becht Engineering, “Looking out over the next 30 years, the annual contribution is determined by lowering the contribution until the closing balance for any given year reaches a predetermined threshold.” Basing the threshold on a percentage of the replacement cost of all components keeps the minimum proportional to the needs of a community. The Threshold Funding results in the first year of contributions is $14,229.00 (5% of all replacement costs) and $14,856.00 (10% of all replacement costs).

Did the Study make any other recommendations?

Yes. The Study suggested that the HOA plan its annual contributions over the “next few years” according to one of the calculation methods listed above. After three years, Becht Engineering recommended the HOA contact them again for an update based on a “proper engineering review of the facility and replacement costs.”

Becht Engineering also noted that higher rates of inflation, lower earned interest rated or prematurely failing components can result in a negative closing cash balance. They also note that the capital fund contributions each year are assumed to rise at the assumed rate of inflation, and that failure to raise the annual contributions with inflation will reduce the closing balance.  

Becht Engineering’s final recommendation was that the HOA review their Study with the HOA’s certified Public Accountant to be used in preparation for the HOA’s annual budget.

How long do we need to keep making these payments?

The Study assumed calculations based on January 2024 through 2054, with an interest rate of 1% and an inflation rate of 3%.  If those assumptions change with economic conditions, adjustments would need to be made.

How can I access the Study?

You can find a copy of the Study here.

What if I don’t want to pay additional money for part of this Reserve Fund?

Unfortunately, this is not a choice for Merion Station residents. As a homeowner in the community, under Maryland Law, the HOA is required to maintain this Capital Reserve Fund. Therefore, paying HOA dues and this Reserve Fund are mandatory.