Michigan HOA Reserve Fund Requirements (2026 Guide)

Overview of Michigan reserve fund and reserve study rules

Michigan law already mandates reserve funds for condominium associations, but it does not yet mandate reserve studies.

MCL 559.205, part of the Michigan Condominium Act (Act 59 of 1978), states that a reserve fund for major repairs and replacement of common elements “shall be maintained by the associations of co-owners.” 

That broad requirement is fleshed out by Michigan Administrative Code R 559.511, which sets the 10 percent minimum and clarifies how reserves are to be treated in condominium bylaws and budgets. (ARS Public)

In contrast, multiple national and state-level summaries confirm that Michigan has no statute requiring reserve studies themselves, even though such studies are widely recommended to determine appropriate funding levels.

What MCL 559.205 requires for condominiums

The Michigan Condominium Act reserve fund requirement is deceptively short: it simply says that a reserve fund for major repairs and replacement of common elements must be maintained by the association of co-owners, and that the administrator (currently LARA) may set minimum standards by rule. 

Despite the simplicity, courts and commentators treat this as a serious obligation. Michigan condo law firms point out that the reserve fund must be dedicated to capital repairs and replacements, not routine operating expenses, and that boards must consider long-term depreciation when building their budgets.

In practice, that means trustees cannot simply “zero out” reserves year after year without exposing the association and themselves to risk.

Administrative Rule R 559.511 and the 10 percent minimum

Administrative Rule R 559.511 translates the statute into a numeric floor. It requires: (ARS Public)

• Condominium bylaws must require a reserve fund for major repairs and replacement of common elements in accordance with section 105 of the Act (MCL 559.205).
• The association of co-owners must maintain a reserve fund equal to at least 10 percent of the association’s current annual budget, on a noncumulative basis.
• Reserve funds may be used only for major repairs and replacement of common elements.
• By the transitional control date, the required amount must be set aside, with the developer liable for any deficiency.
• The bylaws must include a warning that the 10 percent minimum may be inadequate and that associations should analyze whether more is needed.

Michigan condo law firms repeatedly stress that this 10 percent minimum is just that: a floor, not a safe target. For many communities, especially those with aging roofs, roads, or mechanical systems, 10 percent of the annual budget will not be sufficient to avoid special assessments.

Reserve studies in Michigan: not required, but increasingly expected

Even though the 10 percent rule exists, it has no direct relationship to the actual physical condition of a property. That is why Michigan practitioners argue that reserve studies are effectively necessary if you want to fulfill your obligations under the Michigan Condominium Act reserve fund requirement.

Multiple Michigan-focused articles, including from Hirzel Law and other condo counsel, recommend that associations:

• commission a full reserve study with a site visit;
• update the study every 3-5 years; and
• use the resulting funding plan as the basis for reserve contributions, rather than blindly following the 10 percent minimum.

Lenders are also changing expectations. Guidance around Fannie Mae and Freddie Mac underwriting for condos increasingly looks for recent reserve studies and adequate reserve funding, even in states like Michigan that have not yet mandated studies by statute.

Associations that cannot show a current study may find it harder for buyers to obtain financing, which directly affects marketability and property values.

New Michigan reserve study bill: HB 5019 (pending)

HB 5019 would require many existing condominium associations to conduct an initial reserve study within three years of the bill’s passage and then update the study at least every five years. It would apply to condominiums with a budget of 20,000 dollars or more or at least 20 units and would require adoption of a reserve funding plan. (CAI)

As of early 2025, HB 5019 has not been enacted. That means there is still no statutory reserve study requirement in Michigan, but the bill is a clear signal of where policy is headed. Boards that act now - by commissioning studies, adopting formal funding plans, and documenting their decisions - will be better positioned if and when similar “new Michigan HOA law” or condo law changes are passed.

How this applies to HOAs and “Michigan HOA guidelines”

Michigan does not have a single, unified “Michigan HOA Act” equivalent to the Condominium Act. Many HOAs are organized as nonprofit corporations and governed by their recorded declarations and bylaws, together with the Michigan Nonprofit Corporation Act and common-law fiduciary duties. 

For non-condo HOAs:

• There is currently no statewide statute requiring an HOA reserve fund or reserve study.
• Reserve obligations, if any, come from the governing documents and from the board’s duty to maintain common areas (roads, stormwater systems, amenities, etc.).
• Best-practice “Michigan HOA guidelines” recommended by management companies and law firms mirror condo practices: maintain a dedicated reserve account, obtain periodic reserve studies, and budget with long-term capital needs in mind.

In short: condos have clear statutory reserve fund requirements and a 10 percent minimum; HOAs do not, but prudent boards should still plan and fund reserves using similar tools.

Practical reserve study and funding best practices for Michigan communities

Regardless of structure, a practical approach for Michigan boards looks like this:

• Confirm your status: Determine whether your community is a condominium (subject to MCL 559.205 and R 559.511) or a non-condo HOA governed only by its documents and general law.
• Evaluate current reserves: Compare the existing reserve balance and annual contributions to upcoming major projects (roofs, asphalt, siding, mechanical systems). If your projected costs outpace your reserves, 10 percent of the budget is almost certainly not adequate.
• Commission a reserve study: Hire a qualified reserve professional or engineer to perform a physical and financial analysis of your common elements and produce a funding plan. Studies typically assume a 20-30-year horizon with annual contributions that minimize special assessments.
• Update the study regularly: Aim for a full update with site visit every 3-5 years, with interim desktop updates in between, especially if big projects or cost spikes occur.
• Build a realistic funding plan: Use the reserve study to move beyond the bare 10 percent minimum. Phase in increases steadily rather than waiting for a crisis. Owners may not love higher dues, but they dislike emergency assessments even more.
• Communicate openly: Explain the Michigan Condominium Act reserve fund requirements (for condos), the reasoning behind your funding plan, and how it protects both the physical asset and resale values.

How PropFusion supports Michigan reserve planning

PropFusion platform can help boards:

• Centralize documents: Store reserve studies, budgets, and funding plans in one place, with a clear audit trail of decisions.
• Model scenarios: Compare the impact of different contribution levels, loan options, or timing changes while still meeting the Michigan Condominium Act reserve fund requirements and 10 percent minimum.
• Coordinate with professionals: Share data with Michigan reserve specialists, CPAs, and attorneys so they can advise more efficiently.
• Demonstrate governance: Use dashboards and reports to show owners and lenders that the association is planning responsibly and respecting both statutory obligations and best practice.

The Michigan law already requires serious attention to reserves, and the market is moving toward formal reserve studies and funding plans. PropFusion gives you a structure to meet those expectations without drowning in spreadsheets.