Haw. Code R. § 16-107-71

Current through April, 2024

Section 16-107-71 - Exempt association property; disclosure; transition to association property

(a) The association's reserve study shall clearly disclose all assets for which funds are not included in the replacement reserve study because they are exempt association property. The reserve study shall also contain a brief explanation of why those assets are determined to be exempt association property.

(b) An asset which is deemed to be exempt association property because its estimated remaining life is more than twenty years shall become association property on the date its estimated remaining life becomes less than twenty years, referred to in this subsection as the transition date. The asset shall be included in the association's reserve study for the first budget year after the transition date. In calculating a full replacement reserve for the asset after the transition date, the association may disregard the asset's actual age. Instead, the association may assume that at the beginning of the first budget year after the transition date, the asset's estimated age is zero and its estimated useful life is the same as its estimated remaining life.

Example:

An existing asset has an estimated useful life of fifty years, becomes thirty years old on January 1, 2010, has an estimated remaining life of twenty years, and an estimated replacement cost of $100,000. Under the standard method of calculation, a full replacement reserve on December 31, 2010, for that asset would be $62,000 ($100,000 x 31/50). If an association had not already established a replacement reserve for that asset, the full replacement reserve contribution by December 31, 2010, would be $62,000 (or fifty per cent of that amount - $31,000 - for the minimum replacement reserve). If the association adopts the method of calculation permitted by subsection (b), the full replacement reserve contribution required by December 31, 2010, for the same asset would be only $5,000 ($100,000 x 1/20), or fifty per cent of that amount - $2,500 - for the minimum replacement reserve, although subsequent annual contributions will be higher than in the first example. In effect, the asset is deemed to be only one year old, not thirty-one years old on December 31, 2010.

Haw. Code R. § 16-107-71

[Eff 1/2/95] (Auth: HRS §§ 514A-83.6, 514A-99) (Imp: § 514A-83.6)