Who pays when an HOA underfunds its reserves?
Reviewed by the OurHOA team · Updated July 2026
When an HOA underfunds its reserves, special assessments, loans, and higher dues land on whoever owns when the big repair comes due - and buyers inherit the shortfall at closing.
The shortfall does not disappear
Underfunding shows up in a reserve study as a low 'percent funded' number - the gap between what the association has saved and what it should have saved for its aging roofs, roads, and other major components. That gap does not go away because the board kept dues low. When a big component finally fails, the full cost still has to be paid, and it comes from one of three places: a special assessment, a loan, or deferred maintenance that quietly gets worse and more expensive. Keeping dues artificially low today simply moves the bill to tomorrow, usually a larger one.
Whoever owns when the bill lands pays it
Reserves are meant to spread the cost of a long-lived component across all the owners who used it over its life. When reserves are short, that fairness breaks down: the owners who happen to hold title when the roof or the elevator finally gives out absorb decades of deferred cost in a single assessment, including wear that accumulated under previous owners who paid lower dues. This is why a board's decision to underfund is not a favor to residents - it is a transfer of cost onto whoever is unlucky enough to be there when the money is needed.
How it actually lands: assessment, loan, or decay
A special assessment is the most direct route - a one-time bill, sometimes thousands of dollars per home, due on a schedule the board sets. A bank loan spreads the pain out but is repaid through higher regular dues for years, with interest, so owners pay more in total. Deferred maintenance is the hidden third option: the board simply postpones the work, and the component keeps degrading until the repair is both unavoidable and costlier. For how a large one-time assessment works and what limits apply, see our guide on HOA special assessments.
Buyers inherit the exposure
If you are buying into a community, an underfunded reserve is a cost you are quietly taking on. A low percent-funded figure, a thin reserve line in the budget, or a history of special assessments all signal a looming bill. It can also affect financing: mortgage investors such as Fannie Mae generally expect a condominium budget to allocate at least ten percent to reserves, and a project that falls short can be treated as non-warrantable, which makes loans harder to get and can dampen resale value. Ask for the reserve study and the funding status before you buy - our guide on what makes an HOA warrantable versus non-warrantable explains why lenders care.
The cautionary tale and the way out
Chronic underfunding is exactly what drove reform after the Surfside condominium collapse in Florida: the state now requires covered condominium buildings to fund structural reserves and, as of the end of 2024, largely removed the ability to waive them (Florida Statutes section 718.112). A board's fiduciary duty is to fund reserves adequately, not to win popularity with the lowest possible dues. The protection for owners is transparency: read the reserve study, push for an honest funding plan that closes the gap over time, and use your budget-review rights to question a plan that keeps reserves perpetually short.
How OurHOA helps
Underfunding thrives in the dark - when the reserve study sits unread and owners only learn the reserves were thin when the special assessment arrives. OurHOA helps small self-managed communities keep their reserve studies, budgets, and financial records organized and visible, so the board and owners can watch the funding status year over year instead of being surprised by it. OurHOA is record-keeping and communication software, not a reserve specialist or financial advisor - for the funding analysis itself, rely on a qualified reserve study provider and your state's reserve law.
OurHOA is the friendly, affordable way self-managed communities keep dues, records, and reminders in one place. See how it works.
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.