diff --git a/heat/engine/resources/resource_group.py b/heat/engine/resources/resource_group.py
index 1584abf60f..add88c2d17 100644
--- a/heat/engine/resources/resource_group.py
+++ b/heat/engine/resources/resource_group.py
@@ -150,9 +150,8 @@ class ResourceGroup(stack_resource.StackResource):
                              self.stack)
         res_inst.validate()
 
-    def _resource_names(self, properties=None):
-        p = properties or self.properties
-        return [str(n) for n in range(p.get(self.COUNT, 0))]
+    def _resource_names(self):
+        return [str(n) for n in range(self.properties.get(self.COUNT))]
 
     def handle_create(self):
         names = self._resource_names()
@@ -162,14 +161,18 @@ class ResourceGroup(stack_resource.StackResource):
                 {},
                 self.stack.timeout_mins)
 
-    def handle_update(self, new_snippet, tmpl_diff, prop_diff):
-        old_names = self._resource_names()
-        new_names = self._resource_names(prop_diff)
-        if old_names != new_names:
-            return self.update_with_template(
-                self._assemble_nested(new_names),
-                {},
-                self.stack.timeout_mins)
+    def handle_update(self, json_snippet, tmpl_diff, prop_diff):
+        if prop_diff:
+            old_names = self._resource_names()
+            self.properties = json_snippet.properties(self.properties_schema,
+                                                      self.context)
+
+            new_names = self._resource_names()
+            if old_names != new_names:
+                return self.update_with_template(
+                    self._assemble_nested(new_names),
+                    {},
+                    self.stack.timeout_mins)
 
     def handle_delete(self):
         return self.delete_nested()
diff --git a/heat/engine/resources/software_config/software_deployment.py b/heat/engine/resources/software_config/software_deployment.py
index 59d388fbf6..0b3f1279e2 100644
--- a/heat/engine/resources/software_config/software_deployment.py
+++ b/heat/engine/resources/software_config/software_deployment.py
@@ -565,9 +565,8 @@ class SoftwareDeployments(resource_group.ResourceGroup):
         ),
     }
 
-    def _resource_names(self, properties=None):
-        p = properties or self.properties
-        return p.get(self.SERVERS, {}).keys()
+    def _resource_names(self):
+        return self.properties.get(self.SERVERS, {}).keys()
 
     def _do_prop_replace(self, res_name, res_def_template):
         res_def = copy.deepcopy(res_def_template)
diff --git a/heat/tests/test_resource_group.py b/heat/tests/test_resource_group.py
index 10454cfa50..c25b2460d4 100644
--- a/heat/tests/test_resource_group.py
+++ b/heat/tests/test_resource_group.py
@@ -359,6 +359,10 @@ class ResourceGroupTest(common.HeatTestCase):
     def test_update(self):
         """Test basic update."""
         resg = self._create_dummy_stack()
+        self.assertEqual(2, len(resg.nested()))
+        resource_names = [r.name for r in resg.nested().iter_resources()]
+        self.assertEqual(['0', '1'], sorted(resource_names))
+        old_snip = copy.deepcopy(resg.t)
         new_snip = copy.deepcopy(resg.t)
         new_snip['Properties']['count'] = 3
         scheduler.TaskRunner(resg.update, new_snip)()
@@ -366,6 +370,14 @@ class ResourceGroupTest(common.HeatTestCase):
         self.assertEqual((resg.UPDATE, resg.COMPLETE), resg.state)
         self.assertEqual((resg.UPDATE, resg.COMPLETE), resg.nested().state)
         self.assertEqual(3, len(resg.nested()))
+        resource_names = [r.name for r in resg.nested().iter_resources()]
+        self.assertEqual(['0', '1', '2'], sorted(resource_names))
+        scheduler.TaskRunner(resg.update, old_snip)()
+        self.assertEqual((resg.UPDATE, resg.COMPLETE), resg.state)
+        self.assertEqual((resg.UPDATE, resg.COMPLETE), resg.nested().state)
+        self.assertEqual(2, len(resg.nested()))
+        resource_names = [r.name for r in resg.nested().iter_resources()]
+        self.assertEqual(['0', '1'], sorted(resource_names))
 
     def test_aggregate_attribs(self):
         """
diff --git a/heat/tests/test_software_deployment.py b/heat/tests/test_software_deployment.py
index 2da3943a6a..acd60ba965 100644
--- a/heat/tests/test_software_deployment.py
+++ b/heat/tests/test_software_deployment.py
@@ -835,11 +835,10 @@ class SoftwareDeploymentsTest(HeatTestCase):
             set(resg._resource_names())
         )
 
+        resg.properties = {'servers': {'s1': 'u1', 's2': 'u2', 's3': 'u3'}}
         self.assertEqual(
             set(('s1', 's2', 's3')),
-            set(resg._resource_names({
-                'servers': {'s1': 'u1', 's2': 'u2', 's3': 'u3'}}))
-        )
+            set(resg._resource_names()))
 
     def test_assemble_nested(self):
         """
diff --git a/heat/tests/test_structured_config.py b/heat/tests/test_structured_config.py
index 06af1ad4ef..bccb452a0f 100644
--- a/heat/tests/test_structured_config.py
+++ b/heat/tests/test_structured_config.py
@@ -246,11 +246,10 @@ class StructuredDeploymentsTest(HeatTestCase):
             set(resg._resource_names())
         )
 
+        resg.properties = {'servers': {'s1': 'u1', 's2': 'u2', 's3': 'u3'}}
         self.assertEqual(
             set(('s1', 's2', 's3')),
-            set(resg._resource_names({
-                'servers': {'s1': 'u1', 's2': 'u2', 's3': 'u3'}}))
-        )
+            set(resg._resource_names()))
 
     def test_assemble_nested(self):
         """