California Reserve Study Law: What HOA Boards Must Do

Quick Answer: Under the Davis-Stirling Act, a California HOA board whose major components are worth at least half its annual budget (nearly every association) must have a visual inspection of the major components at least once every three years as part of a reserve study (Civil Code § 5550), review the study every year, adopt a reserve funding plan at an open board meeting (§ 5560), and send members an annual budget report with a reserve summary and the Assessment and Reserve Funding Disclosure Summary (§§ 5300, 5565, 5570). Condo buildings with wood balconies must fold their SB 326 balcony inspection into the study (§ 5551). Today no statute sets a minimum funding level, though directors still owe fiduciary duties and the association must levy assessments sufficient to meet its obligations (§ 5600). That changes on January 1, 2032, when AB 2050 requires associations to fund a legal minimum, update their studies annually, and follow a 15% rule if reserves are projected to run out. Updated October 2026.

For board members of California HOAs, the Davis-Stirling Act is the law that sets your financial duties, and the reserve study sits at the center of them. It is the long-term plan for repairing and replacing the major components the association is responsible for, such as roofs, paving, pools, elevators, and, in many condos, balconies.

Here is what the law requires today, what changed recently, and what is coming.

Who has to do a reserve study

The requirement applies when the current replacement value of the association’s major components is at least half of the association’s gross budget (excluding “the association’s reserve account for that period,” in the statute’s words). In practice that covers almost every association with shared buildings or amenities. Very small associations with few common components may fall below it.

What the law requires today

A site inspection at least every three years. The board must have a “reasonably competent and diligent visual inspection of the accessible areas of the major components” conducted as part of the reserve study at least once every three years (§ 5550(a)). This is when the component list gets rebuilt and conditions get measured.

An annual review. Every year, the board must review the study, or have it reviewed, and adjust its analysis of reserve needs (§ 5550(a)). The board can do this review itself or have a professional do it, and many associations use an update without a site visit in the years between inspections. Starting in 2032, AB 2050 requires the study to be reviewed and updated every year.

What the study must contain. At a minimum, the study must identify the major components with less than 30 years of remaining life, estimate each one’s remaining life and replacement cost, estimate the annual contribution needed to pay for them, and include a reserve funding plan (§ 5550(b)). Gas, water, and electrical lines count as major components to the extent the association is responsible for them.

A funding plan adopted in the open. The reserve funding plan must include a schedule of any assessment changes needed to fund it, and the board must adopt it at an open meeting before the membership (§ 5560). Any assessment increase to fund the plan is a separate board action subject to the limits in § 5605.

Annual disclosures. Thirty to ninety days before the fiscal year ends, the association must distribute an annual budget report (§ 5300) that includes:

• a reserve summary showing the estimated reserves needed, the cash actually set aside, and the percent funded (§ 5565),
• a summary of the reserve funding plan, with notice that members can get the full plan on request,
• statements about any deferred repairs and any special assessments the board expects, and
• the Assessment and Reserve Funding Disclosure Summary form, which asks whether projected reserves will be enough in each of the next 30 years (§ 5570).

Monthly oversight. The board must review reserve account reconciliations and statements every month (§ 5500), and withdrawing money from reserves takes two signatures (§ 5510). Reserve money can only be spent on repairing or replacing major components, or related litigation, unless the board follows the temporary transfer rules in § 5515.

The balcony law plugs into this

If your condo project has buildings with three or more attached units and wood-supported balconies, decks, stairways, or walkways more than six feet above the ground, SB 326 (Civil Code § 5551) requires a licensed structural or civil engineer or architect to inspect a random, statistically significant sample of them. For most buildings, the first inspection was due January 1, 2025, so if yours hasn’t happened, you’re already late. After that it repeats every nine years “in coordination with the reserve study inspection,” and the report must be incorporated into the reserve study. Buildings whose permit application was submitted on or after January 1, 2020 must instead be inspected within six years of the certificate of occupancy.

SB 410, effective January 1, 2026, added to that law: the most recent balcony inspection report now goes into the resale disclosure package, the reports became association records that members can inspect for two inspection cycles, and the first page of each report must summarize the findings, including how many elements pose an immediate safety threat. See our full guide to SB 326 balcony inspections and your reserve study, and if the inspection found problems, how to pay for balcony repairs.

What the law does not require (until 2032)

Here is the gap. No statute today sets a minimum amount a board must put into reserves. That doesn’t make underfunding risk-free. Directors still owe fiduciary duties, § 5600 requires assessments sufficient to meet the association’s obligations, many CC&Rs require adequate reserves, and the budget report has to disclose and justify any deferred repairs (§ 5300). Members also see the percent funded every year, buyers’ lenders look at the budget, and underfunded associations end up facing special assessments. If your board is thinking about contributing less than its adopted plan, talk to your association’s attorney first.

That changes with AB 2050, signed September 29, 2026. Starting January 1, 2032:

• every study must state a minimum reserve contribution level that keeps the projected reserve balance from falling below zero over the next 30 years, and the association must fund at least that much each year,
• associations whose reserve balance is projected to fall below zero must put at least 15% of the gross annual budget into reserves each year until it no longer is (the law doesn’t define “gross annual budget” or say exactly which projection triggers this, so ask your attorney),
• if the association can’t fund the minimum through its budget, it must levy a reserve funding special assessment, capped like any other special assessment unless the members vote to approve more, and no more than once every nine years (the law doesn’t say what happens if members vote no), and
• studies must be reviewed and updated every year.

Our full guide to AB 2050 covers the details, the math, and the questions to ask your attorney. For everything else the Legislature passed this year, see new California HOA laws for 2027.

Assessment limits still apply

Funding reserves runs through assessments, and California caps how fast those can rise without the members. Under § 5605, a board can’t raise regular assessments by more than 20% over the prior year, or levy special assessments totaling more than 5% of budgeted gross expenses in a year, without approval from a majority of a quorum of members. And if the association doesn’t meet the § 5300 budget report requirements for the year, the board can’t raise regular assessments at all without that member approval (§ 5605(a)). There are narrow exceptions for emergencies (§ 5610): a court order, a discovered threat to health or safety, or an expense the board could not have reasonably foreseen, which requires written findings. A reserve shortfall your study predicted usually won’t qualify, so ask your attorney before relying on one. AB 2050 doesn’t change these caps, which is why boards that need to close a large reserve gap should start early and move in steps.

Lenders apply their own test

California law is not the only reserve standard your association faces. Fannie Mae and Freddie Mac set reserve requirements for condo projects, and FHA has its own. A condo that is legal under state law can still fail a buyer’s lender. See Fannie Mae’s move to a 15% reserve rule, which applies to loan applications dated on or after January 4, 2027, and FHA condo approval and your reserve fund.

California has some of the most detailed reserve study rules in the country, though until 2032 it sets no funding floor, and it has no license requirement for whoever prepares the study (AB 2050 doesn’t add one). If your association owns property elsewhere, or you’re comparing what other states require, see does your state require a reserve study?

Questions about your community’s compliance or the health of your reserve fund? Our full reserve study covers the study requirements in § 5550, including the three-year site inspection and the funding plan, and folds in your engineer’s balcony report. We don’t perform SB 326 inspections; those take a licensed structural or civil engineer or architect. Contact Apex Reserve Group for a complimentary 30-minute consultation.

This article describes California law in general terms and is not legal advice. Your association’s attorney should advise on how it applies to your community.