Some states have HOA reserve fund laws that regulate community associations when it comes to funding and study requirements. Apart from avoiding potential liability, homeowners associations and condominiums should follow these laws for their own good. Maintaining an adequately funded reserve account is imperative to the financial health of an association.
What Is an HOA Reserve Fund?
A reserve fund is a separate fund or account that an HOA or condominium sets aside for the cost of major repairs and replacements. This fund is distinct from the operating fund, which is used more for regular expenses. Whether or not an HOA must maintain a reserve fund depends on state HOA reserve fund laws and the association’s governing documents.
What Is a Reserve Study?
A reserve study is a comprehensive analysis of an association’s components and finances. This study aims to lay down what an association must repair or replace in the future, identify the current condition of its reserves, and outline a funding plan that will meet the association’s financial needs in due time. It tells an HOA how much it needs to have in its reserves to offset the anticipated cost of major repairs and replacements of components. In some states, HOA reserve laws also dictate a reserve study requirement.
Which States Require an HOA Reserve Fund?
There are 12 states that require condominium associations to allocate funds for reserves: Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, Ohio, and Oregon.
Which States Require an HOA Reserve Study?
There are 12 states that require condominium associations to conduct reserve studies or a reserve schedule: California, Colorado, Delaware, Florida, Hawaii, Maryland, Nevada, Oregon, Tennessee, Utah, Virginia, and Washington State (though Washington only statutorily encourages it).
What Are the HOA Reserve Fund Laws for Homeowners Associations?
State reserve fund laws can vary significantly. Some states require associations to maintain a reserve fund and conduct a reserve study, while others don’t. It is essential to know your state’s HOA reserve account requirement law to avoid liability.
Here are the different HOA reserve fund laws per state.
Alabama
Unit owners’ associations may adopt and amend budgets for reserves. Section 35-8A-302(2).
According to Section 35-8A-302(2), sellers must show buyers an offering statement of the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. The same goes for any other reserves that may be included in the budget. Section 35-8A-403(5).
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Alaska
Unit owners’ associations may adopt and amend budgets for reserves. Section 34.08.320 (2).
According to Section 34.08.320 (2), a public offering statement must consist of assumptions about the calculation of reserve amounts validated by a certified engineer or architect. As it appears on the budget, the reserve amount should include the estimated cost of repairs or replacements and the asset’s estimated useful life. It should also include a statement of any other reserves. Section 34.08.530(5).
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Arizona
For planned communities, the resale disclosure statement should consist of the total reserve amount that the association has. The buyer must also receive a copy of the community’s most recent reserve study, if any. Section 33-1806.
For condominiums, unit owners’ associations may adopt and amend budgets for reserves (Section 33-1242(2)). Section 33-1242(2) states that the resale disclosure statement should consist of the total reserve amount that the association has. The buyer must also receive a copy of the community’s most recent reserve study, if any. Section 33-1260.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Arkansas
There is no legal obligation to perform a reserve study or allocate funds for reserves.
California
Every quarter, the board of common interest developments must review and compare reserve accounts with the past year’s reserves. At least once every 3 years, boards must perform a thorough visual inspection of any properties for which the association is responsible. This study must be reviewed annually, with the board making adjustments as necessary. California Civil Code Section 5550-5520.
As per California HOA reserve fund laws, at a minimum, the reserve study should:
- Identify the major components that the association is responsible for, with a remaining useful life of less than 30 years as of the study date;
- Identify the probable remaining useful life of the components listed under the above requirement;
- Estimate the cost of replacement, repair, or maintenance of the components identified;
- Estimate the total annual contribution of members needed to meet the estimated cost of replacement, repair, or maintenance of the components identified at the end of their useful life, minus the total reserve amount as of the study date; and,
- It consists of a reserve funding plan that states how the association intends to fund the contributions necessary as determined in the study.
There is no legal obligation to allocate funds for reserves.
Colorado
Unit owners’ associations may adopt and amend budgets for reserves. Section 38-33.3-302.
Section 38-33.3-209.5 states: “When the association has a reserve study prepared for the portions of the community maintained, repaired, replaced, and improved by the association; whether there is a funding plan for any work recommended by the reserve study and, if so, the projected sources of funding for the work; and whether the reserve study is based on a physical analysis and financial analysis. For the purposes of this subparagraph (IX), an internally conducted reserve study shall be sufficient.”
There is no legal obligation to allocate funds for reserves.
Connecticut
For condominiums, Section 47-88e states: “Any declarant of a conversion condominium shall provide adequate reserves for capital expenditures in the proposed budget for the condominium.”
Section 47-261e states that “the executive board, at least annually, shall adopt a proposed budget for the common interest community for consideration by the unit owners. Not later than thirty days after adopting a proposed budget, the executive board shall provide to all unit owners a summary of the proposed budget, including a statement of the amount of any reserves and a statement of the basis on which such reserves are calculated and funded.”
Section 47-264(5) states that the resale disclosure statement should consist of the total reserve amount that the association has.
There is no legal obligation to perform a reserve study.
Delaware
For condominiums, Section 81-205(14) stipulates that the declaration must contain “a statement of the maximum number of units that the declarant reserves the right to create.”
The minimum reserve contributions will depend on the reserve study and the statutory formula based on the number of common area components. Section 81-315.
The condominium disclosure statement should include the current reserve balance and the most recent reserve study. Section 81-409.
Condominiums and cooperatives should include a line item in the annual budget funding any repair or replacement reserve. Section 81-324.
District of Columbia
Unit owners’ associations may adopt and amend budgets for reserves. Section 42-1903.08.
Disclosure statements should contain the amount in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 42-1904.04.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Florida
Accounting records must include structural integrity reserve studies. Associations must maintain such studies for at least 14 years after the completion of the study. Section 718.501(1)(c).
According to Section 718-111(13), condominiums must adopt financial reporting rules that include “standards for presenting a summary of association reserves, including a good faith estimate disclosing the annual amount of reserve funds that would be necessary for the association to fully fund reserves for each reserve item based on the straight-line accounting method.”
Annual budgets should also include reserve accounts for roof replacement, painting, pavement, and other items with a replacement cost of over $10,000, among other things. The amount should be based on the association’s most recent structural integrity reserve study. Condominiums should have this study completed by December 31, 2024.
If the most recent study does not include the reserve amount for an item or if the association has not conducted a study, they should calculate the amount using a formula based on the estimated remaining useful life and estimated replacement cost or deferred maintenance expense of the item. The association may make adjustments to the replacement reserve assessments on an annual basis to take the changes into account.
An association may waive funding for the accounts through a majority vote at a duly called meeting until December 30, 2024. Additionally, “effective December 31, 2024, the 998 members of a unit-owner controlled association may not determine 999 to provide no or fewer reserves than required.” Section 718.112(f)(2).
Homeowners associations may adopt budgets for reserves for capital expenditures and deferred maintenance. If no reserve accounts are established, reserve funding is limited according to the stipulations of the governing documents when it comes to dues increases. Associations may waive reserves with proper notification in their financial statement. Section 720.303(6).
Georgia
Condominium resale disclosure statements must contain the estimated or actual operating budget for the association for the current year’s reserves. Section 44-3-111.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Hawaii
Condominium budgets must include several key components, including the reserve amount, projections for future reserves based on a reserve study the association conducts, an explanation detailing the process of calculating reserves, and the planned reserve collection for the upcoming year. An independent reserve study professional must periodically review and update the study every 3 years.
The association must calculate estimated replacement reserves using a formula dependent on the projected lifespan and anticipated capital expenses or major maintenance needs for each property segment. Cash flow plans should extend over 30 years. The estimated replacement reserves should factor in adjustments for anticipated revenues and expenditures occurring before the start of the fiscal year in question. Additionally, there should be separate, designated reserves for each property segment where capital expenditures or major maintenance are expected to exceed $10,000. Property segments with anticipated expenses below this threshold may be aggregated into a single designated reserve. Section 514B-148.
Please note that the italicized text, effective from January 1, 2023, is in accordance with HB 2272.
Idaho
Regarding HOA reserve fund laws in Idaho, there is no legal obligation to perform a reserve study or allocate funds for reserves.
Illinois
Section 765 ILCS 160/1-45 of the Common Interest Community Act requires the board to furnish each owner with a copy of the proposed annual budget. This budget shall provide for reasonable reserves for deferred maintenance and capital expenditures.
Section 760 ILCS 605/9 of the Condominium Act requires the board to adopt a budget that provides reasonable reserves for deferred maintenance and capital expenditures. The board should use an independent professional reserve study to determine the appropriate reserve amount. If an association does not have a reserve requirement in its governing documents, it may waive the reserve requirements in part or whole through a two-thirds vote from the membership.
The disclosure statement must contain a statement of the status and amount of any reserve or replacement fund.
There is no legal obligation to perform a reserve study.
Indiana
Section 32-25-4-4 states: “All sums assessed by the association of co-owners shall be established using generally accepted accounting principles applied consistently and shall include the establishment and maintenance of a replacement reserve fund. The replacement reserve fund may be used for capital expenditures and replacement and repair of the common areas and facilities and may not be used for usual and ordinary repair expenses of the common areas and facilities.”
There is no legal obligation to perform a reserve study.
Iowa
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Kansas
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Kentucky
Section 381.870 of the Horizontal Property Law requires owners to contribute to the replacement reserve fund for general common elements.
Condominium associations may adopt and amend budgets for reserves. Section 381.9167. The resale disclosure statement should consist of the total reserve amount the association has for capital expenditures, if any. Section 381.9203.
There is no legal obligation to perform a reserve study.
Louisiana
Associations may adopt and amend budgets for reserves. Section 9:1123.102.
Public offering statements must contain the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 9:1124.102.
Regarding HOA reserve fund laws in Louisiana, there is no legal obligation to perform a reserve study or allocate funds for reserves.
Maine
Unit owners’ associations may adopt and amend budgets for reserves. Section 1603-102.
Public offering statements must contain the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 1604-103.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Maryland
If the governing body of a condominium has had a reserve study performed on or after October 1, 2016, they must commission an updated reserve study within 5 years from the date of the initial study and subsequently repeat this process at intervals of no more than 5 years. Section 11-109.4.
However, if the governing body of a condominium has not performed a reserve study on or after October 1, 2018, they are obligated to initiate a reserve study by or before October 1, 2023, and then ensure that updated reserve studies are conducted at least every 5 years thereafter. Section 11-109.4.
Unit owners’ associations may adopt and amend budgets for reserves. Section 11-109. The annual budget should include the required level of reserves and be funded according to the most recent reserve study recommendations. If the most recent study is the association’s initial study, the association shall “within 3 fiscal years following the fiscal year in which the initial reserve study was completed, attain the annual reserve funding level recommended in the initial reserve study.” Section 11-109.2.
Resale certificates must include “the current operating budget of the condominium, including details concerning the reserve fund for repair and replacement and its intended use, or a statement that there is no reserve fund.” Section 11-135.
Massachusetts
Section 183A-10(i) requires all condominiums to maintain an adequate reserve fund, collected as part of the common expenses. Monies must be deposited into a separate account from the operating fund. Managing agents must provide a written report of reserve fund reconciliations to the trustees or the managing board of the association. Section 183A-10(f).
As far as HOA reserve fund laws go in Massachusetts, there is no legal obligation to perform a reserve study.
Michigan
Section 559.205 requires condominiums to maintain a reserve fund for major repairs and replacements of common elements.
Rule 559.511 of the state administrative code requires association co-owners to maintain a reserve fund equal to 10% of the association’s current annual budget on a non-cumulative basis, at a minimum. The association may only use these funds for major repairs and replacements of common elements. The bylaws must also contain the following statement:
“The minimum standard required by this section may be inadequate for a particular project. The association of co-owners should carefully analyze their condominium project to determine if a greater amount should be set aside or if additional reserve funds should be established for other purposes.”
There is no legal obligation to perform a reserve study.
Minnesota
The Common Interest Ownership Act mandates that an association’s annual budgets must include replacement reserves, as projected by the board, to be sufficient to cover the replacement of common elements. Furthermore, the act necessitates that the association reassesses the adequacy of its budgeted replacement reserves at least every third year following the recording of the declaration establishing the common interest community. Section 515B.3-1441.
Unit owners’ associations possess the authority to formulate and modify budgets concerning revenues, expenses, and reserves, and they can collect assessments from unit owners to cover common expenses. Section 515B.3-101. Additionally, communities are obliged to provide an annual report containing a breakdown of the association’s total replacement reserves, specifying which components of the common interest community these reserves are designated for and the respective allocated amounts for each of those components Section 515B.3-106. Moreover, disclosure statements must feature the replacement reserves budgeted amount and any additional reserve information.
There is no legal obligation to perform a reserve study.
Mississippi
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Missouri
Unit owners’ associations may adopt and amend budgets for reserves. Section 448.3-102.1.
Resale certificates must include the amount of any reserves for capital expenditures and any portions of those reserves designated by the association for any specified projects. Section 448.4-109.1.
Regarding HOA reserve fund laws in Missouri, there is no legal obligation to perform a reserve study or allocate funds for reserves.
Montana
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Nebraska
Unit owners’ associations may adopt and amend budgets for reserves. Section 76-860.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Nevada
The Common Interest Ownership Act mandates that associations must establish reserves of an appropriate magnitude, funded rationally, to cover the repair, replacement, and restoration of the significant components within the common elements. Section 116.3115.
Furthermore, the association’s executive board is obligated to conduct a reserve study at least once every 5 years, scrutinize the findings to assess the adequacy of the reserves, and make adjustments as needed. The statute outlines the specific procedures for conducting this study. Section 116.31152.
A public offering statement should contain the amount in the budget as a reserve for repairs and replacements. Section 116.4103.
New Hampshire
Public offering statements must include “a statement of the status and amount of any reserve for the major maintenance or replacement fund and any portion of such fund earmarked for any specified project by the board of directors.” Section 356-B:58.
As far as HOA reserve fund laws go in New Hampshire, there is no legal obligation to perform a reserve study or allocate funds for reserves.
New Jersey
Section 46:8B-15 states: “The association may levy and collect assessments duly made by the association for a share of common expenses or otherwise, including any other money duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon, late fees and reasonable attorneys’ fees, if authorized by the master deed or bylaws.
All funds an association collects shall be maintained separately in the association’s name. For investment purposes only, reserve funds may be commingled with the operating funds of the association. Commingled operating and reserve funds shall be accounted for separately, and a commingled account shall not, at any time, be less than the amount identified as reserve funds.”
There is no legal obligation to perform a reserve study or allocate funds for reserves.
New Mexico
Unit owners’ associations may adopt and amend budgets for reserves. Section 47-7C-2.
Disclosure statements must contain the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 47-7D-3.
Regarding HOA reserve fund laws in New Mexico, there is no legal obligation to perform a reserve study or allocate funds for reserves.
New York
Condominium bylaws may contain “provisions governing the payment, collection, and disbursement of funds, including reserves, to provide for major and minor maintenance, repairs, additions, improvements, replacements, working capital, bad debts and unpaid common expenses, depreciation, obsolescence, and similar purposes.” RRP Section 339-V.
The directors of a corporation “shall periodically set aside reasonable sums for reserves.” CCO Section 72.
There is no legal obligation to perform a reserve study.
North Carolina
Unit owners’ associations may adopt and amend budgets for reserves. Section 47C-3-102 and 47F-3-102. A public offering statement must contain the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 47C-4-103.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
North Dakota
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Ohio
Section 5311.081 states that, unless otherwise provided in the declaration or bylaws, the condominium unit owners association, through the board of directors, “shall adopt and amend budgets for revenues, expenditures, and reserves in an amount adequate to repair and replace major capital items in the normal course of operations without the necessity of special assessments, provided that the amount set aside annually for reserves shall not be less than 10% of the budget for that year unless the reserve requirement is waived annually by the unit owners exercising not less than a majority of the voting power of the unit owners association.”
Section 5312.06 states that planned community owners associations, through its board of directors, “shall annually adopt and amend an estimated budget for revenues and expenditures. Any budget shall include reserves in an amount adequate to repair and replace major capital items in the normal course of operations without the necessity of special assessments, unless the owners, exercising not less than a majority of the voting power of the owners association, waive the reserve requirement annually.”
There is no legal obligation to perform a reserve study.
Oklahoma
As far as HOA reserve fund laws go in Oklahoma, there is no legal obligation to perform a reserve study or allocate funds for reserves.
Oregon
Section 94.595 and 100.175 state the following:
“(1) The declarant, on behalf of a homeowners association, shall:
(a) Conduct an initial reserve study as described in subsection (3) of this section;
(b) Prepare an initial maintenance plan as described in subsection (4) of this section; and
(c) Establish a reserve account as provided in subsection (2) of this section.”
It goes on further to state that a “homeowners association shall establish a reserve account to fund major maintenance, repair or replacement of all items of common property which will normally require major maintenance, repair or replacement, in whole or in part, in more than one and less than 30 years, for exterior painting if the common property includes exterior painted surfaces, for other items, whether or not involving common property, if the association has responsibility to maintain the items and for other items required by the declaration or bylaws.”
Upon the transition of power from the declarant to the association, the board of directors must annually establish a budget for the planned community, including provisions for allocating funds to the reserve account. Section 94.645 and 100.483. However, it is worth noting that the board of directors, subject to approval from all owners, may choose not to contribute to the reserve account for the following year. Section 94.595 and 100.175.
Pennsylvania
Unit owners’ associations may adopt and amend budgets for reserves. Section 3302 and Section 5302.
Disclosure statements must contain the amount in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 3402 and Section 5402.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Rhode Island
Unit owners’ associations may adopt and amend budgets for reserves. Section 34-36.1-3.02.
Condominium public offering statements are required to provide a budget that outlines the necessary reserves for items such as exterior surface painting, roof replacement, roadway resurfacing, and other items specified in the declaration. These statements should also include a breakdown of the expected lifespans for common elements and the potential impact on assessments. Section 34-36.1-4.03.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
South Carolina
There is no legal obligation to perform a reserve study or allocate funds for reserves.
South Dakota
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Tennessee
Unit owners’ associations may adopt and amend budgets for reserves. Section 66-27-402.
Disclosure statements must include “a statement of the amount, or a statement that there is no amount, included in the budget as a reserve for repairs and replacements, and whether or not any study has been done to determine their adequacy, and if a study has been done, where the study will be made available for review and inspection, and a statement of any other reserves.” Section 66-27-503.
If the condominium board of directors has performed a reserve study on or after January 1, 2023, they are required to perform an updated reserve study within 5 years from the date of the initial study. Subsequently, they must ensure an updated reserve study is conducted at least every 5 years.
However, if the board of directors has not conducted a reserve study on or after January 1, 2023, they are obligated to initiate a reserve study by or before January 1, 2024. Subsequently, they must ensure that this study is updated every 5 years. Section 66-27-403.
There is no legal obligation to allocate funds for reserves.
Texas
Unit owners’ associations may adopt and amend budgets for reserves. Section 82.102.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Utah
Condominium management committees must perform a reserve analysis at intervals of no more than 6 years. Additionally, they must review and, if necessary, update a previously conducted reserve analysis no less frequently than every 3 years. Section 57-8-7.5.
An association of unit owners must annually provide unit owners with a summary of the most recent reserve analysis or update. Section 57-8a-211.
There is no legal obligation to allocate funds for reserves.
Vermont
Unit owners’ associations may adopt and amend budgets for reserves. Section 27A-3-102.
Public offering statements must contain the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 27A-4-103.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Virginia
Section 55.1-1965 states that, except as otherwise provided in the governing documents of a condominium, the board shall:
“1. Conduct a study at least once every five years to determine the necessity and amount of reserves required to repair, replace, and restore the capital components as defined in § 55.1-1900;
2. Review the results of that study at least annually to determine if reserves are sufficient; and
3. Make any adjustments the executive board deems necessary to maintain reserves, as appropriate.”
It goes on to say:
“C. To the extent that the reserve study conducted in accordance with this section indicates a need to budget for reserves, the unit owners’ association budget shall include:
1. The current estimated replacement cost, estimated remaining life, and estimated useful life of the capital components as defined in § 55.1-1900;
2. As of the beginning of the fiscal year for which the budget is prepared, the current amount of accumulated cash reserves set aside to repair, replace, or restore the capital components and the amount of the expected contribution to the reserve fund for that fiscal year;
3. A statement describing the procedures used for estimation and accumulation of cash reserves pursuant to this section; and
4. A statement of the amount of reserves recommended in the study and the amount of current cash for replacement reserves.”
Resale certificates should also include the most recent reserve study report in its entirety or a concise summary of the report. They must make a declaration stating the current status and total value of any reserve or replacement fund, specifying any portion of the fund that the association has designated for a specific project.
Washington
Unit owners’ associations may adopt and amend budgets for reserves set up a reserve account, and prepare a reserve study. Section 64.34.304 and 64.38.020.
Furthermore, Section 64.34.388 specifies that “the decisions relating to the preparation and updating of a reserve study must be made by the board of directors of the association in the exercise of the reasonable discretion of the board. Such decisions must include whether a reserve study will be prepared or updated and whether the assistance of a reserve study professional will be utilized.”
Section 64.34.380 and 64.38.065 also state the following:
“An association is encouraged to establish a reserve account with a financial institution to fund major maintenance, repair, and replacement of common elements, including limited common elements that will require major maintenance, repair, or replacement within thirty years. If the association establishes a reserve account, the account must be in the association’s name. The board of directors is responsible for administering the reserve account.
Unless doing so would impose an unreasonable hardship, an association with significant assets shall prepare and annually update a reserve study. The initial reserve study must be based on a visual site inspection by a reserve study professional. At least every 3 years, an updated reserve study must be prepared and based upon a visual site inspection conducted by a reserve study professional.”
A public offering statement must contain copies of the association’s current reserve study, if any. Section 64.34.410 outlines the disclosures necessary in a public offering statement if the association does not have a reserve study.
More Washington HOA Reserve Fund Laws
Section 64.90.545 also states:
“(1) Unless exempt under subsection (2) of this section, an association must prepare and update a reserve study following this chapter. An initial reserve study must be prepared by a reserve study professional and based upon either a reserve study professional’s visual site inspection of completed improvements, a review of plans and specifications of or for unbuilt improvements, or both when construction of some but not all improvements is complete. An updated reserve study must be prepared annually. An updated reserve study must be prepared at least every third year by a reserve study professional and based upon a visual site inspection conducted by the reserve study professional.
(2) Unless the governing documents require otherwise, subsection (1) of this section does not apply (a) to common interest communities containing units that are restricted in the declaration to nonresidential use, (b) to common interest communities that have only nominal reserve costs, or (c) when the cost of the reserve study or update exceeds ten percent of the association’s annual budget.
(3) The governing documents may impose greater requirements on the board.”
Associations required to perform a reserve study according to RCW 64.90.545 must create one or more accounts for their reserve fund. Reserve accounts should be income-earning accounts and controlled directly by the board.
There is no legal obligation to allocate funds for reserves.
West Virginia
Unit owners’ associations may adopt and amend budgets for reserves. Section 36B-3-102.
Public offering statements must contain the amount included in the budget as a reserve for repairs and replacements. If there is no amount, the statement must show that as well. Section 36B-4-103.
There is no legal obligation to perform a reserve study or allocate funds for reserves.
Wisconsin
For condominiums created on or after November 1, 2004, the declarant must establish a statutory reserve account at the time of condominium creation and must provide a statutory reserve account statement. The declarant determines the annual assessment amount that unit owners will be charged for reserve funds.
However, the declarant has the choice not to establish a statutory reserve account when creating the condominium or can opt to terminate such an account during the period of declarant control. If the declarant decides not to establish a statutory reserve account or terminate it, the association must address the matter of establishing a statutory reserve account at the first annual meeting held after the expiration of any period of declarant control or at a special meeting of the association convened within one year following that expiration.
Furthermore, it’s possible for an association to create or terminate a statutory reserve account with the written consent of a majority of the unit votes. Section 703.163.
There is no legal obligation to perform a reserve study.
Wyoming
There is no legal obligation to perform a reserve study or allocate funds for reserves.
The Final Word
As you can see, HOA reserve fund laws can vary per state. Even if your HOA does not have a statutory requirement to fund reserves, it is still a good idea to do so. An adequately funded reserve and an updated reserve study will help your association stay financially healthy.
Clark Simson Miller helps homeowners associations and condominiums with financial management, including reserve planning. Call us today at 865.315.7505 or contact us online to learn more!
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