RESERVE FUNDING
ADHERENCE TO FEDERAL AND STATE REGULATIONS
One of the most significant forces reshaping reserve study practices and strategies is the rapidly evolving regulatory, lending, and insurance landscape. In recent years, heightened attention to building safety, aging infrastructure, and deferred maintenance has resulted in new statutory requirements at the state level and more stringent underwriting standards at the federal level—particularly for condominium associations. Today, these requirements do more than establish compliance obligations; they directly influence a community’s ability to access mortgage financing, maintain property values, and demonstrate long- term financial sustainability. STATE STATUTORY REQUIREMENTS In response to building failures and growing concern over aging building stock, many states have enact- ed or are considering legislation affecting reserve studies and reserve funding. These laws may require community associations to: • Conduct periodic reserve studies. • Prohibit or restrict the waiver of reserves. • Maintain minimum reserve funding levels. • Perform and fund for preventive maintenance. • Complete structural, facade, or milestone inspections tied to long-term funding plans. States that currently require community associations to conduct reserve studies and/or fund reserves include California, Colorado, Florida, Hawaii, Maryland, Nevada, New Jersey, Ohio, Tennessee, Virginia, and Washington. Similar legislation is pending in additional states. Because statutory requirements continue to evolve, associations and reserve professionals should regularly consult current guidance. The most up-to-date information on state reserve requirements can be found on CAI’s website. FEDERAL LENDING AND REGULATORY REQUIREMENTS FOR CONDOMINIUMS In addition to state law and Reserve Study Standards , federal lending policies play a critical role in shap- ing reserve funding practices for condominium associations. Federal agencies including the Federal Housing Administration , Fannie Mae , and Freddie Mac establish reserve, maintenance, and insurance expectations that directly affect project eligibility.
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