Underfunded reserves are the single most common cause of special assessments in Florida community associations. A well-funded reserve account protects owners from unexpected large expenses and maintains property values. Here is what every board needs to know.
Reserves are funds set aside each year to cover the future replacement of major common area components — roofing, painting, pavement, pool equipment, elevators, and similar items with a remaining useful life of less than 30 years and a replacement cost exceeding $10,000. Without reserves, these costs must be funded by special assessments.
Florida Statute 718 requires condominium associations to maintain reserve accounts for roof replacement, building painting, pavement resurfacing, and any other item with a deferred maintenance cost exceeding $10,000. Boards may waive or reduce reserves only by a vote of the membership — and doing so without a vote is a violation of state law.
A reserve study is a professional analysis of all reservable components, their remaining useful life, and their estimated replacement cost. The study produces a recommended annual reserve contribution to ensure funds are available when needed. PHS recommends that all associations commission an updated reserve study every 3–5 years.
A fully funded reserve account maintains a balance equal to the percentage of each component's useful life that has been consumed. Threshold funding maintains a minimum balance to avoid the reserve account going negative. Most Florida associations use threshold funding — but boards should understand the difference and make an informed choice.
When reserves are insufficient to cover a major repair or replacement, the association must levy a special assessment — a one-time charge to all owners. Special assessments are unpopular, can be financially devastating for owners on fixed incomes, and can depress property values. Adequate reserve funding is the best protection against them.
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