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. Civil Code §1365.5(e)(5).

Disclosure Format. The disclosure summary must by in the format described in Civil Code §1365.2.5. See sample Funding Disclosure courtesy of Association Reserves, Inc.

Open Meeting. The reserve plan must be adopted in an open meeting. Civil Code §1365.5(e)(5).

Assessment Restrictions. Any assessment increase to fund the reserves must conform to the limitations found in Civil Code §1366(b). This means the board can, without membership approval, impose 20% annual increases in regular dues and 5% special assessments.

Distribute to Membership. 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. Civil Code §1365(a)4.

Not Admissible Re Mismanagement. The summary of the association's reserves is not admissible to show improper financial management of an association, provided that other relevant and competent evidence of the financial condition of the association is not made inadmissible by this provision. Civil Code §1365(a)4.

For a list of companies that specialize in providing reserve studies for community associations, see our Business Directory.