California HOA Reserve Study Requirements & Reserve Fund Laws (2026 Guide)

In California, reserve planning is not optional for most common interest developments. Civil Code Section 5550 requires HOAs to prepare a reserve study that looks at all major common area components with less than 30 years of remaining useful life, estimates what it will cost to repair or replace them, and sets out a funding plan that covers at least the next 30 years. 

This reserve study underpins the association’s long-term budget, annual disclosures, and day-to-day decisions about assessments.

At the same time, California law does not set a fixed “magic number” for funding, such as 70 percent or 100 percent funded. Instead, the Davis-Stirling Act focuses on process and disclosure: boards must adopt a reserve funding plan, disclose reserve status and any deficiencies to owners each year, and exercise prudent fiscal management when deciding how much to assess.

The legal framework: key Civil Code provisions

Several sections of the Civil Code drive California HOA reserve requirements:

• Civil Code 5550 sets out the reserve study requirements, including the three-year visual inspection cycle and the minimum contents of the study.
• Civil Code 5560 requires a reserve funding plan that includes a schedule of assessment changes needed to carry out the plan and specifies that the plan must be adopted at an open board meeting.
• Civil Code 5565 describes the “Summary of the Association’s Reserves” that must be provided to members each year, based on the most recent reserve study.
• Civil Code 5500 requires the board to regularly review financial statements, including reserve account statements, the check register, and delinquency reports.
• Civil Code 5300 sets out the contents and timing of the Annual Budget Report, which must include reserve information and be delivered 30 to 90 days before the start of the fiscal year.

Taken together, these provisions govern how often reserve studies must be done, how information is disclosed, and how the board should plan funding over the long term.

Are reserve studies mandatory in California?

The short answer is yes for virtually all HOAs. Civil Code 5550 requires an association to perform a reserve study if the current replacement value of its major components equals or exceeds one-half of the association’s gross budget, excluding reserves.

For most California communities with common area roofs, paving, siding, mechanical systems, and amenities, that threshold is easily met.

Even very small associations that might fall under the threshold still have fiduciary duties to plan for large repair and replacement expenses and to disclose material financial risks to owners. In practice, most boards treat a full reserve study as the standard of care, regardless of size, so they can show they have considered the future costs of maintaining the property.

What must a California reserve study include?

Civil Code 5550(b) spells out the mandatory contents of a reserve study. At a minimum, the study must include: identification of the major components the association is obligated to maintain that have less than 30 years of remaining life; the probable remaining useful life of each component; an estimate of the cost to repair, replace, restore, or maintain those components; and an estimate of the total annual contribution needed to cover those future costs after subtracting existing reserve funds.

The reserve study must also include a reserve funding plan that shows how the association intends to meet those obligations over the next 30 years or more. This plan typically projects contribution levels, anticipated expenditures, and resulting reserve balances year by year. 

The California Department of Real Estate’s Reserve Study Guidelines for Homeowner Association Budgets provide additional practical guidance on how to structure these projections and test whether reserves are “sufficient” for the community’s risk tolerance.

How often must an HOA update its reserve study and budget?

Under California law, a “full” reserve study with a reasonably competent and diligent visual inspection of the accessible areas of the major components must be conducted at least once every three years.

Between full studies, the board is required to review and, if necessary, adjust the reserve funding plan every year as part of the Annual Budget Report process.

On the financial side, Civil Code 5500 obligates the board to review key financial reports on a regular basis, including account statements for the operating and reserve accounts, income and expense statements, the check register, and delinquency reports.

This monthly financial review is where the board confirms that reserve contributions are being made as planned and that reserve expenditures are properly authorized.

Rules for using, borrowing, and replenishing reserve funds

California treats reserve funds as restricted money. Civil Code 5510 states that reserve funds may be used only for the repair, restoration, replacement, or maintenance of the major components for which the reserve fund was established, or for related litigation costs.

Routine operating expenses are not supposed to be paid from reserves.

If the association temporarily needs cash, Civil Code 5515 allows the board to authorize a transfer from the reserve account to the operating account, but only if the board provides advance notice, adopts a written finding explaining why the transfer is necessary, and sets out a plan for repayment. 

The statute expects these transfers to be repaid within one year, unless the board properly documents that a longer period is in the association’s best interests. Civil Code 5520 adds additional notice and accounting requirements when reserve funds are used for litigation.

These rules are central to what many owners search for as “HOA reserve funds California” - they want to know when the board can tap reserves, whether reserves can be borrowed for cash flow, and what protections exist against misuse.

Common components in California HOA reserve studies

While every development is different, most California HOA reserve studies include a familiar set of components:

• Roofing systems (sloped or flat roofs, flashing, gutters, and downspouts)
• Exterior painting and siding, including stucco repairs and sealants
• Asphalt streets, driveways, and parking lots; concrete walkways and curbs
• Mechanical and electrical systems such as boilers, chillers, pumps, and lighting controls
• Elevators, fire alarm systems, and security gate systems in mid-rise and high-rise buildings
• Amenities such as pools, spas, saunas, tennis courts, playgrounds, and clubhouses
• Fences, walls, entry monuments, signage, mailboxes, and irrigation controllers

In California, reserve professionals are increasingly paying attention to items affected by wildfire risk, drought, and new balcony and exterior elevated element inspection laws (for example, SB 326).

Those inspection regimes are separate from the reserve study statute but often lead to significant repair or replacement projects that must be included in the reserve planning.

Practical steps for California HOA boards

For a California board that wants to stay comfortably within the law and avoid unpleasant surprises, a practical reserve planning process looks like this:

1. Put the three-year “full study” and annual update deadlines on the association’s compliance calendar so they are never missed.
2. Engage a qualified reserve study professional who understands California’s Davis-Stirling Act and local construction costs. Many boards search for “Davis-Stirling reserve study” or “California HOA reserve requirements” when choosing providers; look for firms that cite the correct Civil Code sections and provide statute-based disclosures.(davis-stirling.com)
3. Before the site visit, gather governing documents, past reserve studies, financial statements, maintenance records, and any recent engineering reports so the preparer has a complete picture.
4. After receiving the draft report, review the component list, cost assumptions, and funding plan carefully. Challenge anything that does not look realistic for your community’s actual wear-and-tear.
5. Adopt the reserve funding plan at an open meeting, make any necessary assessment changes, and ensure the Annual Budget Report includes the required reserve summary and funding plan disclosures.
6. Communicate clearly with owners about why assessments are set where they are. Underfunded reserves may feel easier in the short term, but they almost always lead to special assessments, deferred maintenance, or lower property values down the road.

By following this cycle, the board can confidently say it is meeting California HOA reserve study requirements and exercising sound business judgment.

Key takeaways for California HOAs

For California associations, “doing a reserve study” is not a one-time project. The law expects an ongoing process: a full reserve study with a visual inspection at least every three years, annual updates to the funding plan, regular financial reviews, and detailed written disclosures to owners.

There is no statutory minimum funding percentage, but there is a clear statutory expectation that boards understand their future obligations, plan for them using a 30-year funding horizon, and explain to owners whether current funding is adequate.

Boards that treat the reserve study as a strategic tool rather than a compliance headache are the ones that avoid emergency assessments and major conflicts. 

Using California’s detailed reserve laws as a framework, you can build a reserve plan that is transparent, defensible, and aligned with your community’s long-term goals.