Florida law requires every condominium and cooperative budget to include reserve accounts for capital expenditures and deferred maintenance, and, since 2022, requires buildings three or more stories tall to fund reserves for their structural components without the option of an owner waiver. Homeowners associations under Chapter 720 follow a different rule: reserves are mandatory only if the developer created them or the members voted to require them. Here is how the rules work in practice.
Condominiums: what the budget must reserve
Section 718.112(2)(f) requires a condominium association's proposed annual budget to include reserve accounts for capital expenditures and deferred maintenance. The statute names three items that must always be reserved, roof replacement, building painting and pavement resurfacing, and adds any other item for which the deferred maintenance expense or replacement cost exceeds the statutory threshold, which is now $25,000 as adjusted annually by the Division for inflation. Cooperatives have a parallel requirement in Chapter 719.
For buildings three or more habitable stories in height, the budget must also include reserves for the structural components identified in the association's Structural Integrity Reserve Study: roof, load-bearing walls and other primary structural members, fireproofing and fire protection systems, plumbing, electrical systems, waterproofing and exterior painting, windows and exterior doors, and any other item affecting structural integrity above the SIRS cost threshold. Our SIRS article explains that study.
How reserves are calculated
The amount to be reserved each year is based on each component's estimated remaining useful life and estimated replacement cost or deferred maintenance expense, using either of two methods:
- Straight-line (component) method. Each component has its own reserve account. The annual contribution is the remaining cost divided by the remaining years of useful life.
- Pooled (cash-flow) method. Components are grouped and funded together so that the pool never falls below zero, which usually lowers the annual contribution. Pooling requires an owner vote to adopt for existing straight-line reserves, and for SIRS components the pool must still fund the components as the study recommends.
The Division's rules (Chapter 61B-22, Florida Administrative Code) prescribe how the reserve schedule must be presented in the budget, including the beginning balance, contributions, expenditures and ending balance for each account or pool.
What owners can no longer waive
Before 2022, a majority of the voting interests present at a duly called meeting could vote each year to waive reserves entirely or to fund them at a lower level, and could vote to use reserve funds for other purposes. Many Southwest Florida buildings did so for decades.
That ended for structural components. For budgets adopted on or after December 31, 2024, an association may not vote to waive or reduce funding for the SIRS components, and it may not vote to use those reserve funds for any purpose other than the components for which they were set aside. A board that presents a "waive reserves" ballot for structural items in a covered building is inviting a Division complaint and, given that the statute defines SIRS failures as a breach of fiduciary duty, personal exposure.
What owners can still waive
Owners retain the ability to vote, by a majority of the voting interests present at a duly called meeting, to waive or reduce funding for reserves that are not SIRS structural components, such as pavement resurfacing, pool resurfacing, non-structural amenity items and, in buildings under three stories, all of the traditional reserves. They may also vote to use non-structural reserve funds for other purposes. Every waiver or reduction must be voted on annually; it does not carry forward. The statute also requires the proposed budget to disclose, in bold type, that if reserves are waived or reduced the association may have to levy special assessments later.
Where a SIRS concludes that a particular component does not require reserve funding, the association may follow the study's recommendation rather than reserving for it.
Recent flexibility for associations facing large repairs
Legislation enacted in 2025 recognized that many buildings must fund reserves and pay for milestone-inspection repairs at the same time. Among the tools it added: associations may fund reserves through a loan or line of credit; an association that has completed a milestone inspection may, with owner approval and for a limited period, adjust reserve contributions to prioritize the repairs the inspection requires; and reserve funds may be invested in specified accounts to earn a return. Each of these has conditions, votes and time limits that should be confirmed against the current statute and the governing documents before a board relies on them.
Reserve disclosures in the financial report
The year-end financial report must disclose the reserves by account, including the beginning and ending balances and the amounts contributed and spent, and must state whether reserves were waived or reduced during the year. Associations with a website must post the report and the budget. Buyers receive the budget and the SIRS as part of the resale disclosures, so the reserve schedule is now a marketing document as well as a compliance document.
Homeowners associations: a different rule
Chapter 720 does not require HOA reserves. Under section 720.303(6), reserves are mandatory only if (a) the developer initially established them in the budget, or (b) the members voted, by a majority of the total voting interests, to provide for them. Once reserves are mandatory, the association must fund them annually unless the members vote to waive or reduce funding, and the funds may be used only for their intended purpose unless the members approve otherwise.
If an HOA budget does not provide for reserves, the budget must carry a conspicuous statutory statement, in bold type, that the budget does not provide for reserve accounts for capital expenditures and deferred maintenance that may result in special assessments, and that owners may elect to provide for reserves. Many HOA declarations nonetheless require reserves, and communities with roads, gates, lakes and clubhouses are increasingly funding them voluntarily. A board that manages a large HOA without reserves should expect that question at every annual meeting.
Condominium versus HOA at a glance
| Question | Condominium (Ch. 718) | Homeowners association (Ch. 720) |
|---|---|---|
| Are reserves required? | Yes, for roof, painting, pavement, any item above the threshold, and SIRS components in 3+-story buildings | Only if developer-established or member-voted; otherwise a bold disclosure is required |
| Can owners waive them? | Non-structural reserves: yes, by majority of voting interests present at a duly called meeting, annually. SIRS structural reserves: no (budgets adopted on/after Dec. 31, 2024) | Yes, by majority vote at a duly called meeting, if reserves are mandatory |
| Can reserve funds be used for other purposes? | Non-structural: with owner vote. Structural: no | With member approval |
| Study required? | SIRS for 3+-story buildings, updated every 10 years | No statutory study; many declarations require one |
| Method | Straight-line or pooled | Per the documents; either method used in practice |
Frequently Asked Questions About Reserves
Can our condominium still vote to waive reserves this year?
Only for components that are not structural SIRS items. For buildings three or more stories tall, the reserves the SIRS identifies must be funded and cannot be waived or reduced in any budget adopted on or after December 31, 2024. Two-story buildings may still waive or reduce their traditional reserves by majority vote.
What happens if we fund reserves at less than the study recommends?
For SIRS components, underfunding is a statutory violation and a breach of the directors' fiduciary duty. For other components, funding below the schedule requires an annual owner vote and the bold-type disclosure in the budget.
Can we borrow to fund reserves or milestone repairs?
Recent legislation expressly allows associations to fund reserves through loans and lines of credit, subject to the governing documents' borrowing authority and any required owner approval. The board resolution and loan documents should identify the components being funded.
Does our HOA have to fund reserves?
Only if the developer established reserves in the original budget or the members voted to require them. If neither has happened, the budget must state in bold type that reserves are not being provided. Check the declaration, because many HOA documents require reserves regardless of the statute.
What is the difference between straight-line and pooled reserves?
Straight-line reserves keep a separate account for each component; pooled reserves fund a group of components together so that cash is available when each comes due. Pooling typically lowers annual contributions but requires an owner vote to adopt and, for SIRS components, must still fund the study's schedule.
Are reserve balances disclosed to buyers?
Yes. The budget and the SIRS are part of the resale disclosures a seller must give a purchaser, and the year-end financial report discloses reserve balances and any waivers. Well-funded reserves have become a selling point in Southwest Florida.
Contact Hamilton Mikes
Hamilton Mikes helps condominium, cooperative and homeowners association boards adopt budgets and reserve schedules that comply with the statute and the governing documents. Call 239-594-7227 or visit our Budgeting and Financial Reporting page.
Statutes and authorities referenced
- § 718.112(2)(f), Fla. Stat. (annual budget; reserve accounts; waiver limits)
- § 718.112(2)(g), Fla. Stat. (structural integrity reserve study)
- § 718.111(13), Fla. Stat. (year-end financial reporting, including reserve disclosures)
- § 719.106(1)(j)–(k), Fla. Stat. (cooperatives)
- § 720.303(6), Fla. Stat. (HOA budgets and reserves)
- Fla. Admin. Code R. 61B-22.005 (reserve calculation and disclosure)
- Session laws: SB 4-D (2022), SB 154 (2023), HB 913 (2025)