Reserve Funding Plans

Association boards must adopt a "Reserve Funding Plan" to meet their association's obligation for the repair and replacement of all major components. The plan must include a schedule of the date and amount of any change in regular or special assessments that would be needed to sufficiently fund the reserves.

There is no required funding level set by the Davis-Stirling Act that associations must meet. Associations are required exercise prudent financial management to meet appropriate funding levels for the long-term maintenance needs of their common areas.

The disclosure summary must be in the format described in California Civil Code Section 5570 and the reserve plan must be adopted in an open meeting.

Any assessment increase to fund reserves must conform to the limitations found in California Civil Code Section 5605 (b). Boards can, without membership approval, approve 20% annual increases in regular assessments and 5% annual special assessments.

The funding plan must be distributed to all members along with the association's annual operating budget, not less than 30 nor more than 90 days before the start of the association's fiscal year.

A summary of the association's reserves is not admissible in court to show improper financial management of an association. However, other relevant and credible evidence of the financial condition of the association is not made inadmissible by this provision. (California Civil Code Section 5300 (b)).

Pacific Reserve Studies