An HOA reserve fund is money set aside for large, predictable repairs and replacements: roofs, paving, elevators, pools. A reserve study tells the board how much to save and when. Without one, a failing roof becomes a special assessment.
What belongs in reserves
Under the National Reserve Study Standards, a reserve component typically meets four tests: it is the association’s responsibility, it has a limited useful life, its remaining life is predictable, and its cost is above a minimum threshold. Everyday repairs come from the operating budget instead.
The reserve study
- Full study: an inventory of components with a site inspection.
- Update with a site visit: a professional re-inspects and updates the numbers.
- Update without a site visit: the numbers are updated from records only.
Each study lists every component’s useful life, remaining life and replacement cost, and a funding plan.
Percent funded
Fully funded balance = current cost × effective age ÷ useful life, added up across components. Percent funded is the actual reserve balance divided by the fully funded balance. Example: a $90,000 balance against a $150,000 fully funded balance is 60% funded.
Washington requirements
- A reserve study prepared by a reserve study professional, then “an updated reserve study must be prepared annually” (RCW 64.90.545).
- At least every third year, the update is based on a visual site inspection by a reserve study professional.
- The study covers components whose replacement cost is more than 1% of the annual budget, the percent funded, contribution rates for full and baseline funding, and 30-year projections (RCW 64.90.550).
- Exemptions include communities with only nominal reserve costs and cases where the study would cost more than 10% of the annual budget.
- The requirement already applies to communities created before 2018 (RCW 64.90.365).
Illinois requirements
An Illinois condominium budget must “provide for reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements” (765 ILCS 605/9(c)(2)), and the proposed budget shows the reserve portion (605/18(a)(6)).
How BAB helps
BAB isn’t a reserve study tool. It tracks your maintenance and reserve fund balances, the budget against actual spending, and expenses with approval, and exports financial reports to PDF for the board. See budgets and reports.
FAQ
What is an HOA reserve fund?
Money set aside for large, predictable repairs and replacements of common property, such as roofs, paving and elevators.
How often does a Washington HOA need a reserve study?
An update every year, with a site inspection by a reserve study professional at least every third year (RCW 64.90.545).
What does percent funded mean?
The reserve balance divided by the fully funded balance, which is each component’s current cost times its effective age divided by its useful life.
Do Illinois condos need reserves?
Yes. The budget must provide reasonable reserves for capital expenditures and deferred maintenance (765 ILCS 605/9(c)(2)).
Sources
- RCW 64.90.545: reserve study
- RCW 64.90.550: study contents
- 765 ILCS 605/9: budget and reserves
- National Reserve Study Standards (2016 version, reservestudy.com)
Disclaimer: This guide is general information, not legal advice. Statutes change and your governing documents may add stricter rules, so check with your association’s attorney before a binding meeting or vote. Last updated: October 2026.