What is HOA capital reserves?

Capital reserves are money an HOA sets aside specifically for major, infrequent expenses, replacing a pool, repaving a lot, repairing storm damage, kept separate from the operating fund that covers day-to-day costs like utilities and landscaping. A reserve study tells a board whether that fund is adequate, usually expressed as a percent funded, and 70 to 130 percent is the industry’s standard planning benchmark for healthy, not a legal threshold written into any statute.

Why does HOA capital reserves matter?

An underfunded reserve doesn’t cause a problem until the day something expensive breaks, and then the community is looking at a special assessment nobody planned for. Thirteen states now legally require a reserve study on a regular cycle, per the CAI Foundation’s tracking of state reserve laws, and even where it isn’t required, skipping one is a bet that nothing major fails on the board’s watch.

When You’ll Run Into This

Reserve levels usually only get real scrutiny once a year, during a reserve study, or right after something expensive breaks and everyone wants to know if there’s enough saved up. Our breakdown of the HOA reserve study explains how boards figure out if they’re saving enough.