Future‐Proofing Your HOA: Lessons from Shackleton (and the Davis‐Stirling Act)
By Erik Sundquist, RS
This article first appeared in our Communicator Magazine, Summer 2025 Edition.
IN THE WINTER of 1914, as explorer Ernest Shackleton and his crew faced the crushing ice of Antarctica aboard the Endurance, they didn’t rely on wishful thinking to survive. They relied on planning, preparation, and constant reevaluation of conditions. Though the ship was eventually lost, every crew member survived thanks to leadership that understood this truth: conditions may be beyond your control, but your response never is.
Today’s California HOAs are navigating a similarly hostile environment – not of ice and isolation, but of inflation, regulatory pressure, and risk exposure. Boards and community managers can’t stop insurance markets from tightening or buildings from aging. But they can lead with foresight, and they can pre‐ pare. In this landscape, the updated reserve study is their map, compass, and survival kit all in one.
Let’s examine four urgent issues facing California HOAs in 2025, and explain how an updated, well‐funded reserve study directly helps address each one. As a Reserve Specialist (RS), I’ve seen firsthand how proactive planning can transform communities – not just on paper, but in real‐world resilience.
SKYROCKETING INSURANCE COSTS: FINANCIAL PREPAREDNESS IS KEY
It’s not a secret California’s property insurance market has entered a “hard market” phase – premiums are increasing rapidly, underwriting is more stringent, and many carriers have exited high‐risk areas altogether. The Department of Insurance has acknowledged this trend, especially in wild‐ fire‐prone zones where many HOAs are located. According to CAI California, some HOAs have seen premiums triple or quadruple in recent years, even after implementing fire‐hardening measures.
A current, detailed reserve study reassures insurers that the association is taking risk seriously. It shows that the HOA is financially prepared to meet high deductibles or even self‐insure certain risks, if necessary. Insurers are increasingly scrutinizing not just brush clearance and roof type, but also reserve levels and past maintenance practices when pricing policies. The Davis‐Stirling Act doesn’t just mandate reserve studies – it requires transparency. Civil Code §5300 and §5550 mandate that associations disclose reserve funding plans in their annual budgets and perform visual inspections of major components every three years. These disclosures become even more critical when insurance underwriters review a community’s risk profile.
Tip: Work with your insurance broker to understand how reserve levels and documented maintenance influence underwriting. Maintain updated reserve disclosures as part of your HOA’s Annual Budget Report.
AGING INFRASTRUCTURE: PLANNING REPLACEMENTS, PREVENTING SURPRISES
Much of California’s HOA housing stock was built during development booms in the 1970s through the early 2000s. As these properties age, so too do the critical systems that serve them: roofs, siding, drainage, concrete, balconies, elevators, and more. The failure of these components can lead to major disruptions and even safety concerns – as seen in high‐profile cases like the Champlain Towers South collapse in Florida.
California’s SB 326 (for condos) man‐ dates periodic inspections of elevated exterior elements, such as decks, balconies, and walkways. These inspections must occur at least once every nine years by a licensed structural engineer or architect and findings must be documented. While SB 326 doesn’t require reserve funding for these inspections, aligning them with a reserve study ensures boards are not blindsided by large repair costs.
A good reserve study doesn’t just list components and their replacement timelines. It considers wear‐and‐tear, environmental stressors, and contractor insights. It helps prioritize projects and creates a funding roadmap that helps avoid the “big bang” of multiple major expenses hitting in the same year.
Tip: Integrate SB 326 inspection schedules with your reserve update cycle; and consult your reserve preparer to coordinate upcoming expenses so there are no surprises when inspection reports reveal deficiencies.
LEGAL AND FIDUCIARY RESPONSIBILITIES: RESERVE STUDIES AS COMPLIANCE TOOLS
HOA board members in California have fiduciary obligations similar to corporate directors. They must act in good faith, with due diligence, and in the best interest of the membership. Failing to maintain common areas or budgets for future repairs could be considered a breach of that duty.
The Davis‐Stirling Act (Civil Code §5550‐ §5580) requires that associations prepare a reserve study every three years, including a site visit, and annually review and adjust the funding plan. Civil Code §5300 mandates that the reserve summary be included in the Annual Budget Report pro‐ vided to all members – not just the board.
Neglecting these steps can lead to serious consequences. Boards that fail to budget appropriately may face lawsuits from homeowners or even liability for damages caused by deferred maintenance. Furthermore, lenders increasingly examine an association’s reserve funding when approving mortgages for prospective buyers. An underfunded reserve can directly reduce property values by making it harder for homes to sell.
A well‐prepared reserve study demonstrates compliance, foresight, and transparency. It provides a defensible position should the board ever be challenged by members, lenders, or regulators.
Tip: Use your reserve study as a road‐ map to fulfill legal obligations and reduce liability exposure. Retain all reserve‐related records and keep them accessible for cur‐ rent and future boards.
DEFERRED MAINTENANCE: THE COST OF WAITING
The most expensive project is the one you have to do twice – or the one that fails and causes collateral damage. Deferred maintenance accelerates wear, invites litigation, and can create serious safety issues.
A 2021 report by the Foundation for Community Association Research (FCAR) emphasizes that preventive maintenance yields a 545% return on investment over reactive maintenance. Yet many HOAs still postpone critical work due to lack of funds or homeowner resistance.
This is where a reserve study becomes an essential persuasion and planning tool. It helps boards explain to home‐ owners why repairs need to be made and how funding has been allocated over time. It also shows what could hap‐ pen if projects are delayed: increased costs, property damage, or emergency assessments.
The CAI’s “Best Practices: Community Association Maintenance” guide recommends pairing your reserve study with a maintenance manual that outlines cyclical tasks. When used together, these documents support consistent upkeep and help extend the lifespan of major systems – ultimately saving money.
Tip: Schedule reserve study updates to align with your maintenance planning calendar. Use the reserve’s component list to inform contract scopes and sea‐ sonal inspections.
RESERVE STUDIES AS STRATEGIC NECESSITIES
In a world of rising costs, evolving laws, and increased liability, the reserve study is no longer a passive planning document – it’s a strategic risk management tool. It touches every facet of HOA governance: financial stability, legal compliance, risk mitigation, and homeowner trust.
HOAs that take their reserve responsibilities seriously send a message to insurers, regulators, and homeowners alike: We are prepared. We are accountable. We are resilient.
Much like Shackleton’s crew relied on their tools, training, and teamwork to navigate one of history’s most harrowing journeys, today’s boards can rely on the reserve study to guide them through uncertainty.
In a world of rising costs, evolving laws, and increased liability, the reserve study is no longer a passive planning document – it’s a strategic risk management tool. ■
Erik Sundquist, RS is the managing partner of SMA Reserves, LLC – reserve preparers serving California since 2010. SMA prepares reports that are expertly prepared, simply presented.