Indiana HOA Reserve Fund Laws & Reserve Study Best Practices (2026 Guide)

Indiana reserve study and reserve fund overview

In Indiana, the law draws an important line between reserve funds and reserve studies.

On the reserve fund side, the Indiana Condominium Act explicitly requires condominium associations to include a replacement reserve fund in their assessments. All sums assessed by the association of co-owners must be established using generally accepted accounting principles and must include the establishment and maintenance of a replacement reserve fund. 

That fund can be used for capital expenditures and the repair or replacement of common areas, and it must be kept separate from ordinary operating expenses.(Justia)

On the reserve study side, Indiana has chosen not to legislate. There is no statute that says “you must have a reserve study” or that dictates how frequently a study must be updated. 

National compilations of state reserve laws clearly place Indiana in the category of states with a mandated condominium reserve fund but no statutory reserve study requirement.

For non-condominium HOAs, the picture is even more flexible. Indiana statutes governing planned communities and nonprofit corporations focus on governance, notice, and financial record-keeping, but stop short of prescribing specific reserve funding levels or study requirements.(eadsmurraypugh.com) 

That gives Indiana HOA boards wide discretion, tempered by fiduciary duties, to design their own approach to capital planning.

What the Indiana Condominium Act requires in practice

For condominium associations, the replacement reserve fund requirement in Indiana Code § 32-25-4-4 has several practical implications:

• A reserve fund is not optional. The association must establish and maintain a replacement reserve fund as part of its overall budget and assessments.
• The fund must be segregated. The statute requires the fund to be held in a separate interest-bearing account or in permitted investments similar to public-sector reserve funds, not commingled with operating cash.(Justia)
• Spending is restricted. Reserve money is limited to capital expenditures and the repair or replacement of common areas, not routine maintenance or day-to-day operating costs.
• Contributions must be set using sound accounting principles. Assessments, including reserve contributions, must be set using generally accepted accounting principles applied consistently, which supports transparent and defensible budgets.

Although the law mandates the existence and basic handling of the fund, it does not tell boards how to size it. That is where reserve studies and long-term financial modeling become critical, even if not legally mandated.

No statutory reserve study mandate, but real fiduciary obligations

While Indiana does not require a reserve study by law, board members are still subject to the standard of care under the Indiana Nonprofit Corporation Act. Directors of nonprofit corporations, including most HOAs and many condominium associations, must act in good faith, with the care an ordinarily prudent person would exercise in a similar position, and in a manner they reasonably believe is in the association’s best interests.

In practice, that duty usually points toward:

• Understanding the association’s long-term capital obligations.
• Making informed decisions about reserve funding levels.
• Avoiding predictable financial crises when major components inevitably require replacement.

A professionally prepared reserve study, or at least a structured internal capital plan, is one of the clearest ways for Indiana boards to show they have satisfied that duty of care.

Best practices for Indiana HOAs and condominiums

Because the law leaves significant room for judgment, Indiana associations should adopt industry best practices that fit their community:

1. Review your governing documents.
   
   • Confirm whether your declaration, bylaws, or rules require specific reserve contributions or a reserve study.
   • Many developers and attorneys incorporate higher standards than state law, so you may already have contractual obligations even if statutes are silent.
2. Commission an initial reserve study or capital plan.
   
   • For condominiums, a reserve study is the logical tool to determine how much must flow into the statutory replacement reserve fund.
   • For HOAs, the study helps convert board discretion into a documented, data-backed funding policy.
3. Define a funding objective.
   
   • Decide whether your community aims for a “strong,” “fair,” or “weak” funded position over a 20-30 year horizon.
   • Many boards target at least a fair to strong funded level to reduce the risk of special assessments and protect property values.
4. Align annual contributions with the plan.
   
   • Use the reserve study to set contributions as a deliberate budget line, not as whatever is left after operating expenses.
   • Instead of relying on rules of thumb, let the study’s projections for upcoming projects and inflation drive your contribution rate.
5. Build a review and update cadence.
   
   • Plan to obtain a new or updated reserve study every 3 to 5 years and conduct annual high-level check-ins on key assumptions (component lives, costs, and investment returns).
   • Update sooner if you complete major projects, add amenities, or see significant shifts in contractor pricing.

Determining appropriate reserve contribution levels in Indiana

Without a statutory percentage or formula, many Indiana boards wonder what is “enough.” While there is no single correct answer, a structured approach can help:

• Start with your component list: roofs, pavement, siding, mechanical systems, elevators, pools, clubhouses, and any specialized infrastructure.
• Project remaining useful life and replacement cost for each component, using local cost data and professional input where necessary.
• Model cash flows over at least 20-30 years, layering in planned contributions, modest annual increases, and reasonable investment return assumptions.
• Stress test the plan by adjusting inflation upward, bringing forward a few projects, or modeling slower dues growth to see how resilient your funding strategy is.

The goal is not perfection, but a realistic, transparent plan that reduces the probability of sudden, unmanageable shortfalls.

Common pitfalls for Indiana associations

Indiana communities often run into trouble when they:

• Treat reserves as a discretionary “nice to have” instead of a core budget item.
• Ignore hidden or less visible components, such as underground utilities, retaining walls, or building envelopes.
• Underestimate construction inflation, particularly in periods of rapid price increases.
• Set dues based on political comfort rather than long-term cost projections.
• Tap reserve funds for operating shortfalls or minor repairs, blurring the boundary between capital and operating budgets.

Condominium boards have an additional layer of risk: because the replacement reserve fund is mandated by statute, neglecting it may increase legal exposure and complicate disputes with owners or lenders.

How PropFusion helps Indiana associations with reserve planning

PropFusion is designed to turn this combination of legal requirements and best practices into an actionable, easy-to-manage process for Indiana communities:

• Centralized reserve planning: Bring your reserve study, governing documents, and capital project history into a single platform.
  
• Funding plan modeling: Visualize how different contribution levels, timing adjustments, and cost assumptions change your reserve trajectory.
  
• Scenario analysis: Test “what if” cases, such as accelerating roof replacements or phasing pavement projects, before locking in a budget.
  
• Collaboration with professionals: Invite reserve study providers to work inside PropFusion so the plan is always aligned with the latest report.
  
• Provider marketplace: For Indiana associations that do not yet have a trusted reserve study consultant, use PropFusion’s marketplace to request and compare proposals from vetted reserve study professionals who understand Indiana’s statutes, climate, and building types.

By combining Indiana’s statutory condominium reserve fund requirement with disciplined, study-based planning, boards can show owners and lenders that they are managing community assets responsibly and proactively.