Property Management

In Hawaii, what is a 'replacement reserve' in property management accounting?

AA. A fund for replacing property managers when they leave
BB. Funds set aside to replace major capital items (roof, HVAC, elevators) at the end of their useful lives✓ Correct
CC. A fund for replacing tenants who vacate unexpectedly
DD. An emergency fund for immediate repairs only

Explanation

Replacement reserves are funds accumulated over time to pay for replacement of major capital items when they reach end of useful life, avoiding special assessments or large lump-sum expenditures.

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