What is an HOA reserve funding plan or disclosure?
By OurHOA · General information · Revised
The plan describes how future work will be funded; the disclosure tells owners what the association has adopted and what it expects. Check assumptions and approvals separately.
Separate the study, plan, and owner summary
A reserve study provides estimates about future component work and funding. The funding plan describes how the association proposes to meet those costs over time. An owner disclosure summarizes specified information about reserves and assessments. Ask which document you are reading, its effective date, and whether the board has adopted the plan shown. A consultant’s recommendation is not automatically an approved charge.
Follow the money through the plan
Find the starting balance, planned contributions, projected spending, and expected ending balances. Ask which assumptions depend on future dues increases, special assessments, loans, or investment income. Check whether the forecast includes a proposed project or an executed contract. For example, a projection that balances only after a future assessment needs an explanation of that assessment’s approval status and timing.
Approval of a plan may not approve an increase
California section 5560 requires the covered plan to show the timing and amounts of needed assessment changes and to be adopted at an open board meeting. A necessary assessment increase requires a separate board action consistent with section 5605. Other jurisdictions have their own procedures. Ask for the decision authorizing an actual charge, rather than treating a forecast entry as the decision itself.
Check the required disclosure for your association
In California, section 5300 places the annual budget report 30 to 90 days before fiscal year end and includes a reserve-plan summary. Members may request the full plan. Section 5570 supplies an assessment and reserve disclosure form that distinguishes already approved assessments from additional contributions not yet approved and reports projected funding. These are California examples; there is no nationwide disclosure form or deadline stated here.
Use the summary to ask specific questions
If a forecast shows a shortfall, ask which project creates it and what response the board proposes. If the summary looks sufficient, check the assumptions and omitted or deferred work before drawing a conclusion. Percent funded is one comparison, not a promise of financial security. Request the underlying plan when the summary does not explain a figure, and keep the response with the budget records.
Sources
These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.