Kentucky HOA Reserve Fund Requirements (2026 Guide)

Overview of Kentucky’s legal framework for HOAs and condos

Kentucky regulates common-interest communities through several key statutes. Older condominium regimes (generally pre-2011) fall under the Kentucky Horizontal Property Law, codified at KRS 381.805 to 381.910. Newer condominiums created after January 1, 2011 are governed by the Kentucky Condominium Act, KRS 381.9101 to 381.9207. (Kaman & Cusimano)

In 2023, Kentucky adopted a Planned Communities statute (KRS 381.785 to 381.801) that applies to many non-condominium HOAs (subdivisions and other planned communities). This act defines “planned communities,” sets rules around declarations, boards, and financial records, and sits alongside general nonprofit corporate law for associations organized as non-profit corporations. (Justia)

Within this framework, reserve funds and reserve studies are addressed indirectly. The statutes talk about replacement reserve funds, budgets that may include reserves, and what must be disclosed on resale - but they do not prescribe detailed funding formulas or require associations to hire a reserve specialist.

What Kentucky law actually requires on reserve funds

Replacement reserve fund under the Horizontal Property Law (older condos)

For communities still governed by the Kentucky Horizontal Property Law, KRS 381.870 requires all co-owners to contribute toward the expense of maintaining a replacement reserve fund for repairs and maintenance of the general common elements.

Key points:

• The law specifically refers to a “replacement reserve fund” linked to the general common elements (and, in practice, often limited common elements).
• Contributions must be made by all co-owners, typically based on their percentage interest in the common elements.
• The statute does not define what “adequate” reserves look like in dollar terms or as a percentage of the budget.

In practice, that means boards of older condo regimes must maintain and fund a replacement reserve account. The board’s challenge is determining the right annual contribution level - a decision that is not dictated by the statute but is still subject to fiduciary standards.

Condominium Act: budgets, reserves, and resale disclosures

For condominiums covered by the Kentucky Condominium Act, the law shifts emphasis to association powers and disclosure duties:

• KRS 381.9167 authorizes the unit owners’ association to adopt and amend budgets for revenues, expenditures, and reserves, and to collect assessments for common expenses. (Kentucky Legislature Apps)
  KRS 381.9203 requires the resale disclosure statement to include the amount of any reserves for capital expenditures, if any, and any designated portions of those reserves for specific projects.

Again, the statute explicitly recognizes reserves for capital expenditures but does not mandate a particular funding level or formula. Instead, the law makes sure that buyers see how much the association has set aside and whether funds are earmarked for specific projects.

Planned communities and stand-alone HOAs

For non-condominium HOAs governed by the Planned Communities statute, Kentucky law sets out definitions, governance rules, and requirements for financial records and reports, but it does not create a specific reserve fund or reserve study mandate. (govt.westlaw.com)

Most reserve expectations for these HOAs come from:

• The community’s declaration and bylaws, which may require reserve accounts.
• General nonprofit corporate law, which imposes duties of care and loyalty on directors.
• Lender and buyer expectations, especially where Fannie Mae, FHA, or private lenders review the association’s financial health.
  
  

Reserve studies in Kentucky: not required, but strategically important

Kentucky statutes do not require associations to conduct formal reserve studies, and industry summaries consistently state there is “no legal obligation” to do so. However, that absence of a mandate does not relieve boards from the duty to plan for long-term capital expenses.

A reserve study is a practical tool that helps Kentucky boards:

• Translate statutory reserve fund requirements (such as the replacement reserve fund under KRS 381.870) into specific annual contribution amounts.
• Demonstrate that the board made informed, data-backed decisions about reserve funding.
• Reduce the risk of sudden special assessments when roofs, pavement, mechanical systems, or other major components fail.
• Support accurate resale disclosures regarding reserve balances and designated projects, as required under the Condominium Act.

From a risk-management standpoint, the more the law relies on broad standards (like “replacement reserve fund” and fiduciary obligations) instead of detailed formulas, the more valuable an independent reserve study becomes. It serves as the board’s documentation that contributions were set prudently, not arbitrarily.

How Kentucky reserve requirements affect HOAs and condo boards day to day

Given this legal landscape, responsible Kentucky boards should treat reserves and reserve studies as core governance responsibilities, not optional add-ons.

For older condos under the Horizontal Property Law:

• The replacement reserve fund is not optional - it is a statutory requirement.
• The board must ensure contributions are regular and sufficient to keep up with anticipated capital repairs.
• If the association regularly defers contributions or dips into reserves for operating expenses, it will be difficult to argue that it complied with KRS 381.870 or its fiduciary duties if a major asset fails and owners face a large special assessment.

For newer condos under the Condominium Act:

• The law expects reserves to be addressed in the budget and clearly disclosed in resale documentation.
• Chronically low reserve balances can become a problem in sales and refinances when buyers, real estate agents, or lenders examine the resale certificate and financial statements.
• A reserve study helps align annual budgets, long-term plans, and what the association discloses under KRS 381.9203.

For planned communities / HOAs:

• Even without an express statutory reserve requirement, the board still has to plan for roads, walls, amenities, and other common elements that will eventually require major repair or replacement.
• Without reserves and a long-term funding plan, the association is more likely to rely on special assessments or emergency loans - both of which are unpopular with owners and may invite questions about whether the board met its duty of care.
  

Best-practice standards for Kentucky reserve planning

Because Kentucky law is relatively silent on the “how” of reserve funding, boards are free - and expected - to adopt best practices that fit their community.

Common industry standards include:

• Commissioning a full reserve study and updating it regularly. Typical practice is a full study every 5-10 years, with financial updates every 2-3 years or whenever major assumptions change.
• Setting a clear funding objective (Full, Threshold, or Baseline) and documenting why that objective balances risk and owner affordability.
• Avoiding zero-based budgeting for reserves. Even if the board chooses a more aggressive funding goal, it should not aim to run the reserve account near zero on a recurring basis.
• Using the study’s recommendations to shape annual budgets, rather than treating reserves as “leftover” after operating expenses.

For Kentucky boards, it is especially important to document the rationale for any funding decisions that deviate from the reserve study’s recommendations - for example, if the board phases in increases over several years to avoid sudden jumps in assessments.

How reserve planning ties into disclosures, lending, and resale values in Kentucky

The interplay between reserve levels, disclosures, and financing is critical:

• Under the Condominium Act, resale certificates must disclose reserve balances and any designated portions. Low or nonexistent reserves can become a red flag for buyers and their lenders. 
• Standard Kentucky seller disclosure forms ask whether the property is subject to an association and what the regular assessments are. Even if the form does not list reserve contributions separately, sophisticated buyers and agents will ask.
• National lenders and investor guidelines often look for evidence that reserves are funded and that the association has a plan for major repairs. Reserves that are obviously inadequate, compared with the age and condition of the property, can impact financing options.

In short, even though Kentucky law stops short of mandating reserve studies, the combination of statutory reserve fund language, disclosure requirements, and lender expectations makes professional reserve planning a practical necessity for any community that wants stable resale values and predictable budgets.

How PropFusion can support Kentucky communities

PropFusion’s reserve study software and marketplace for reserve study professionals can help Kentucky HOAs, condo associations, and engineering firms:

• Build detailed component inventories and funding projections that reflect Kentucky’s legal environment, including replacement reserve expectations and resale disclosures.
• Model different funding scenarios (for example, more aggressive vs. gradual contribution increases) and see their impact on percent funded and risk of special assessments.
• Centralize documentation so that when buyers, lenders, or attorneys ask for evidence of prudent reserve planning, the board can produce clear reports tied directly to the statutes discussed in this guide.

Used together with qualified local legal counsel, this gives Kentucky boards a defensible, transparent approach to reserve planning - even in a state where the statutory language stops at “replacement reserve fund” and “reserves for capital expenditures.”

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