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The condo crisis in Florida is worrisome, to say the very least. Aging properties, stricter structural and cash reserve funding laws due to the Surfside collapse, and skyrocketing association fees have made life harder for condo owners in the Sunshine State.
Speaking of cash reserve funding laws, if you’re thinking of buying a condo anywhere in the U.S., you should be aware that only 12 U.S. states, including Florida, legally require condo/HOA associations to maintain formal cash reserve plans or studies—and even fewer require full funding.
But what exactly does this mean? Well, some condo owners in those states may be better protected against surprise assessments. Others, however, may face painful dues hikes or special assessments that could make living in an HOA financially unattainable.
What is an HOA cash reserve—and how does it differ from a special assessment?
Put simply, a cash reserve is a fund that an HOA is legally required to maintain in order to cover future maintenance, repairs, and emergency costs.
“These reserves are based on projections of future needs and are meant to ensure the long-term upkeep and safety of the community,” says Raul Gastesi, attorney and partner at Partner & Gastesi Lopez Mestre & Cobiella in Miami.
In contrast, a special assessment is an unplanned, additional charge levied on homeowners when unexpected issues arise that the reserves can’t cover. These typically occur when major repairs are needed—like roof replacements or structural fixes.
“Special assessments tend to create homeowner dissatisfaction because they often involve large, sudden out-of-pocket costs that were not originally budgeted for,” explains Gastesi.
Which 12 states require reserve funds—and what makes each law unique?
“Association directors/members who elect to fund reserves, whether by choice or requirement, are better positioned to manage future repair costs, avoid special assessments, and maintain the long-term financial stability and property values of their communities,” says Danielle Blake, chief of residential and advocacy for MIAMI REALTORS® in Florida.
While reserve funds do come with benefits, including the ones described by Blake, they’re not perfect. They can often lead to higher HOA fees and other issues, such as overspending. Currently, only these 12 states mandate reserve funding:
First, there’s Florida
Following the Champlain Towers collapse, Florida enacted a law requiring condominium associations to conduct structural reserve studies every 10 years and fully fund those reserves by the end of 2024.
“While this regulation is a critical step for life safety and long-term property value, it can be painful for current owners,” says Gastesi. “Many associations, especially those that historically deferred maintenance to save costs, now face steep financial catch-ups.”
Properties that fall behind on reserves not only risk safety but can suffer significant financial consequences. After all, disrepair affects a unit’s resale value, refinancing options, and the association’s ability to borrow.
“In extreme cases, banks may refuse to lend for purchases in underfunded buildings, limiting sales to all-cash buyers and dramatically reducing market value,” explains Gastesi.
The other 11: Hawaii, Delaware, Maryland, Oregon, Nevada, Connecticut, Illinois, Massachusetts, Michigan, Minnesota, Ohio
These states require reserve funds—and some also mandate formal reserve studies that are used to assess funds and ensure they’re at optimal levels. Maryland and Oregon, for example, require reserve studies every five and three years, respectively. Also, Hawaii, like Florida, requires significant reserves for structural problems due to safety or housing pressures.
It’s also important to note that a broader group of twelve states require formal reserve studies, including California, Colorado, Florida, Hawaii, Maryland, Nevada, Oregon, Tennessee, Utah, Virginia, Washington, and Delaware.
Can homeowners negotiate reserve levels—or special assessments?
“In states where reserves are mandated by statute, there’s no negotiation—complying with them is required by law. Rarely, an association might request a payment plan from regulators to catch up, but this is generally discouraged,” says Gastesi.
For special assessments, negotiation may be possible, especially at the implementation level. As a homeowner, you can attend budget and board meetings to gain a better understanding of the necessary maintenance and repair projects.
“Ask whether the association is using a straight-line or pooled method for funding reserves, as a pooled method may provide more flexibility,” Blake advises. “Also, explore financing options, such as the use of a line of credit, bank loan, government-backed programs that may help to reduce the financial burden on owners.”