Glossary of Terms: capital reserves

a source of funds that the HOA can use to repair and replace major capital facilities, buildings, and equipment of the association.

Also known as "reserve funds" or simply "reserves"

Unless the governing documents require more stringent standards, the board must review on a monthly basis:

1. A current reconciliation of the association's operating accounts
2. A current reconciliation of the association's reserve accounts
3. The current year's actual operating revenues and expenses compared to the current year's budget
4. The latest account statements prepared by the financial institutions where the association has its operating and reserve accounts
5. An income and expense statement for the association's operating and reserve accounts.
6. The check register, monthly general ledger, and delinquent assessment receivable reports.

(Amended by Stats. 2018, Ch. 396, Sec. 3. (AB 2912) Effective January 1, 2019.)

CA Civ. Code § 5500

Use of Reserve Funds

1. The signatures of at least two persons, who shall be directors, or one officer who is not a director and one who is a director, shall be required for the withdrawal of moneys from the association's reserve accounts
2. The board shall not expend funds designated as reserve funds for any purpose other than the repair, restoration, replacement, or maintenance of, or litigation involving the repair, restoration, replacement, or maintenance of, major components that the association is obligated to repair, restore, replace, or maintain and for which the reserve fund was established.

(Added by Stats. 2012, Ch. 180, Sec. 2. (AB 805) Effective January 1, 2013. Operative January 1, 2014, by Sec. 3 of Ch. 180.)

CA Civ. Code § 5510

Reserve Planning

1. The reserve funding plan required by Section 5550 shall include a schedule of the date and amount of any change in regular or special assessments that would be needed to sufficiently fund the reserve funding plan
2. The plan shall be adopted by the board at an open meeting before the membership of the association as described in Article 2 (commencing with Section 4900) of Chapter 6
3. If the board determines that an assessment increase is necessary to fund the reserve funding plan, any increase shall be approved in a separate action of the board that is consistent with the procedure described in Section 5605

(Added by Stats. 2012, Ch. 180, Sec. 2. (AB 805) Effective January 1, 2013. Operative January 1, 2014, by Sec. 3 of Ch. 180.)

CA Civ. Code § 5560