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Ashley Dietz Gray, VP MarketingSep 11, 20203 min read

To Reserve Or Not To Reserve and How it Impacts the Community

It is not uncommon for boards to try to keep assessments down especially during times like COVID-19.  One way that a board can accomplish the “appearance” of keeping assessments down while still covering the day-to-day expenses is to waive or underfund the reserves.  At the time, waiving or underfunding reserves may not seem like a big deal but association reserves serve a very important purpose to slowly save money over a longer period of time for big ticket items, capital expenditures and deferred maintenance for which the association may be responsible for maintaining, repairing and/or replacing.

In the short run, owners tend to be happy that reserves are waived or underfunded because it can save an owner quite a bit of money per month depending on the size of the association.  However, inadequate or no funding for future major repairs and replacements may adversely affect the ability of owners to sell or refinance their units, because of concerns of prospective buyers, or because of the difficulty of obtaining mortgage financing under programs of various local, federal, and quasi-federal lending and lending-related organizations.  Inadequate reserve funding also creates the necessity of future special assessments which can become quite burdensome and expensive and possibility become unaffordable for owners to pay.

Under 718.112 of the Florida Statutes, reserves must be established for roof replacement, building painting, and pavement resurfacing regardless of the amount of deferred maintenance expense or replacement cost, and for any other item for which the deferred maintenance expense or replacement cost exceeds $10,000.  The purpose of reserves is to assure that funds for major repairs and replacements will be available when needed.

Currently in South Florida, the real estate market is hot.  Interest rates are at an all time low, inventory is low and sales are booming.  In recent weeks, I’ve seen real estate deals fall apart because buyers cannot qualify for FHA loans, Fannie Mae or Freddie Mac due to those particular associations having less than 10% reserves. In those situations, the lenders required the buyers to put 25% down. Those real estate deals all died due to the lack of reserves and the buyers not having the funds to put down on the purchase.

This budget season, I strongly urge boards to consider reserves.  Some reserves are better than no reserves and boards may want to take into account the minimum amount lenders are requiring for buyers to qualify for loans so that the community is a marketable community. 

The waiving or reducing reserves requires a membership meeting in addition to the Board’s budget meeting. Both meetings can be held on the same night but the budget meeting should take place first so that the budget is passed with full reserves. When that meeting is concluded, a membership meeting may be opened to vote on whether reserves should be fully funded, reduced or waived. The vote must be very specific.  A majority vote of those owners in attendance at the properly noticed membership meeting is required in order to not fully fund reserves.  

If your association has any questions regarding budgets and reserves, please be certain to seek out competent legal counsel that has the requisite expertise in the area of community association law.  If you currently do not have legal counsel or if you are interested in contacting me with respect community association legal issues, please do not hesitate to contact me at

Lindsay Raphael, Esq. of Raphael Law, P.A., legal practice consists of representation of condominium, homeowner, commercial association as well as developers who build them.  Lindsay has been selected to the Florida Super Lawyers Up and Coming List for multiple years and is a Martindale Hubble AV rated attorney.  Lindsay Raphael can be reached at 561-961-0918.


Ashley Dietz Gray, VP Marketing

I graduated Summa Cum Laude from Florida Atlantic University in 2010 with my BA in Communications. Upon graduating, I honed my skills in the field by working as a Media Assistant at WPBF-25 and at ESPN760. I began working at City County Credit Union in 2011 as the Marketing Coordinator. Currently, I handle the marketing at Campbell Property Management.