Alabama HOA Reserve Fund Requirements and Reserve Study Laws (2026 Guide)

Overview of Alabama HOA and condo laws that touch reserves

Alabama’s legal framework for HOAs and condominiums is lighter than in many other states when it comes to reserve studies and reserve funds. There is no statute that forces your board to commission a reserve study or to fund reserves to a particular percentage. 

However, boards still have clear responsibilities around budgeting, common expenses, and financial transparency. Understanding those responsibilities is the first step toward building a strong reserve funding strategy.

Three bodies of law are especially relevant for reserve planning in Alabama:

• Alabama Homeowners’ Association Act (Ala. Code §§ 35-20-1 et seq.) governs most residential HOAs created on or after January 1, 2016, and older associations that opt in. It sets requirements for organizational structure, board powers, assessments, liens, and records. (DoorLoop)
• Alabama Uniform Condominium Act of 1991 (Ala. Code §§ 35-8A-101 et seq.) governs condominiums created after January 1, 1991 and regulates budgeting, assessments, common expenses, and association records. (Homeowners Protection Bureau, LLC)
• Alabama Condominium Act (Ala. Code §§ 35-8-1 et seq.) applies to older condominium projects created before 1991.

None of these laws use the phrase “reserve study” in the way industry professionals do. Instead, they speak in terms of common expenses, assessments, surplus funds, and association records. 

Reserves fit inside those concepts as allocations of funds intended for future repair and replacement of common elements, rather than as a separate, highly regulated category.

What the statutes say about budgets, reserves, and records

For condominiums under the Alabama Uniform Condominium Act, the unit owners’ association has explicit power to adopt and amend budgets for revenues, expenditures, and reserves, and to collect assessments to pay common expenses. (Justia) 

Common expenses are defined broadly and include allocations to reserves. Surplus funds remaining after paying common expenses can be credited against future assessments, paid to owners, or held in reserve, depending on what the declaration or bylaws provide.

For HOAs governed by the Alabama Homeowners’ Association Act, the law focuses more on transparency than on prescribing how much to save. Section 35-20-13 requires associations to keep records that include the current operating budget and “reserve funds, if any,” and to make those records reasonably available to members who request access. 

This means that if your HOA has a reserve account, owners have a statutory right to see its balance and related financial information.

In short:

• Alabama law allows associations to create and maintain reserve funds through their budgeting and assessment powers.
• It does not mandate that reserves exist or set a target funding level.
• It does require HOAs (and, through separate provisions, condo associations) to keep financial records available to owners, which naturally includes reserve funds if they are maintained. (cedarmanagementgroup.com)
  

Are reserve studies or reserve funds required in Alabama?

Independent summaries of state laws from the Community Associations Institute and other legal resources confirm that Alabama does not currently require HOAs or condo associations to conduct a reserve study or to fund reserves by statute. 

There is also no statutory schedule such as “every three years” or “every five years” for updating a study.

Practically, that leaves three main drivers for whether your community is required to have reserves or a study:

• Your declaration and bylaws - Some governing documents explicitly require a reserve account, specify minimum annual contributions, or mandate periodic capital reserve evaluations. If so, those contract-like obligations are enforceable, even if state law is silent.
  
• Lender and buyer expectations - Many mortgage lenders and buyers now expect a community to have a reserve study and a healthy reserve balance. Fannie Mae and Freddie Mac guidance, for example, emphasize reserve contributions as part of project-eligibility reviews in condo lending. Communities that ignore reserves can see reduced marketability and more failed sales.
  
• Board fiduciary duty - Even without explicit statutory mandates, boards have a general duty to act prudently and in the best interests of the association. Allowing common elements to deteriorate or relying repeatedly on emergency special assessments can be hard to reconcile with that duty.
  

Recommended reserve study practices for Alabama communities

Because Alabama’s statutes leave so much discretion to the association, boards that want to demonstrate sound financial management should follow established industry standards. A practical baseline for Alabama HOAs and condos is:

• Commission a full reserve study (with on-site component inventory and condition assessment) at least once every 5 years.
• Update the study’s financial analysis and funding plan every 3 years or sooner after major projects, cost shocks, or significant community changes.
• Aim over time to keep reserves within a “strong” to “fair” funding range, often interpreted as roughly 70 to 100 percent of the amount recommended by your reserve study.

A good reserve study in Alabama will typically include:

• A component list of all major common elements with a remaining useful life under 30 years.
• Current replacement cost estimates for each component.
• A schedule of anticipated replacement years across a 20 to 30 year projection.
• A funding plan that shows projected reserve balances, owner contributions, and percent funded year by year.

Following this approach positions your association as professional and forward-looking even though Alabama law does not force you to do it.

How reserve funding decisions impact Alabama HOAs and condos

Because Alabama statutes do not lock you into a particular reserve funding formula, there is a wide gap between communities that manage reserves proactively and those that do not.

If your board underfunds reserves:

• You are more likely to resort to special assessments or emergency increases when roofs, pavement, elevators, or mechanical systems fail.
• Owners face sudden, often large, unplanned bills, creating financial hardship and tension within the community.
• Deferred maintenance can drag down property values and make units harder to finance or sell.

If your board commits to structured reserve funding:

• Annual assessments are more predictable. Small, well-planned increases can replace painful spikes.
• Owners and buyers gain confidence that the association is planning for the long term.
• The board has a clear roadmap for timing major projects, obtaining bids, and coordinating with vendors.

Because Alabama law treats prepayments into reserves as part of common expenses, any surplus funds after paying those expenses can, by default, be held in reserves or applied against future assessments unless your declaration directs otherwise.

That gives boards flexibility to gradually build reserves without overcomplicating the budget.

The role of governing documents in Alabama reserve planning

Given the statutory flexibility, your governing documents carry more weight in Alabama than in some other states. Boards should carefully review:

• Whether the declaration requires a reserve account.
• Whether there is any stated minimum contribution or balance.
• How surplus funds and budget surpluses are to be handled.
• Whether owner approval is required to change reserve contribution levels or to reallocate reserves.

If your documents are silent or vague, you may wish to work with association counsel to amend them. Many Alabama communities choose to add language that:

• Affirms a commitment to long-term capital planning and reserve funding.
• Clarifies the purposes for which reserve funds can be used.
• Sets a baseline annual contribution or ties contributions to a percentage of the total budget.
• Defines when owner approval is needed to borrow from reserves or reduce contributions.

Law firms that focus on condominium and HOA issues in Alabama regularly advise boards on how the Alabama Homeowners’ Association Act and the Alabama Uniform Condominium Act interact with declarations and bylaws in practice. (Patrick Collins, LLC)

Best practices for Alabama boards planning reserves

For both HOAs and condos in Alabama, a practical step-by-step approach looks like this:

• Inventory assets - Work with an engineer or reserve study professional to list all significant common elements: roofs, siding, paving, retaining walls, drainage systems, clubhouses, pools, elevators, mechanical systems, and more.
• Assess condition and remaining life - Document age, observable condition, and estimated remaining useful life. This is where a physical reserve study adds real value compared with a simple spreadsheet estimate.
• Model long-term costs - Forecast major repair and replacement costs over at least 20 to 30 years, incorporating inflation and realistic unit pricing based on Alabama market conditions.
• Choose a funding strategy - Decide whether your association prefers a more conservative “full funding” approach, a threshold model, or a hybrid that balances risk, assessment stability, and owner affordability.
• Integrate reserves into the annual budget - Translate the recommended reserve contribution into the annual budget and assessment structure. Explain the rationale clearly to owners.
• Communicate and update - Provide owners with a high-level summary of the reserve study and funding plan. Revisit the numbers regularly, adjusting contributions as project costs, inflation, and community conditions change.
  
  

How PropFusion supports Alabama associations

Although Alabama law does not compel reserve studies, boards that treat reserve planning as optional are taking a gamble. PropFusion helps Alabama HOAs, condo boards, and association managers turn reserves into a core part of their financial strategy rather than an afterthought.

With PropFusion, you can:

• Request proposals from a network of reserve study professionals who understand Alabama communities and climate conditions.
• Store your reserve study online, track components, and monitor funding status over time.
• Build what-if scenarios to understand how different assessment levels, project timings, or cost assumptions affect your reserve health.
• Export clear reports and charts that make it easier to communicate reserve decisions to owners and lenders.

By combining a modern reserve study platform with access to experienced professionals, PropFusion gives Alabama boards a practical way to meet their fiduciary obligations and avoid the cycle of deferred maintenance and surprise special assessments.

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