Can an HOA Borrow From Its Reserve Fund? State Rules

HOA reserve fund borrowing is allowed only where state law and the governing documents allow it. California lets the board make a temporary transfer with notice, a recorded finding and repayment within one year, and Washington allows one with owner notice and repayment within 24 months.

Florida requires an advance owner vote, and in condos that must have a structural integrity reserve study (SIRS), members can’t vote to move SIRS reserves to any other use.

Can the Board Borrow From Reserves?

An HOA board may borrow from its reserve fund only when state law and the governing documents allow it.

In California, Civil Code Section 5510 restricts reserve expenditures to component repair, restoration, replacement, or maintenance, along with litigation involving that work. But Section 5515 carves out a structured exception: the board may approve a temporary transfer to operating accounts to meet short-term cash flow needs, provided it follows specific notice rules and restores the money within one year.

In Washington, RCW 64.90.540 permits a board to withdraw reserve funds to pay for unforeseen or unbudgeted costs unrelated to component replacement. The board must adopt a formal repayment schedule of no more than 24 months and notify owners.

In Florida, the statutes take a more restrictive approach. Under Section 718.112 for condominiums and Section 720.303 for homeowners associations, reserve funds can be used only for authorized reserve expenditures unless owners approve another use in advance: a majority of all the total voting interests for condos, or a majority vote at a meeting with a quorum for HOAs. Florida boards cannot unilaterally approve a temporary loan from reserves.

In Nevada, Nevada Revised Statutes (NRS) 116.3115 strictly limits reserve funds to the repair, replacement, and restoration of major components and explicitly forbids using reserves for daily maintenance.

If your community is located in any other state, you must review your state statutes and your declaration of covenants, conditions, and restrictions (CC&Rs) or bylaws.

California Temporary Transfer Rules

California spells out the steps for HOA reserve fund borrowing in its Civil Code. Under the Civil Code, the board can authorize a temporary transfer from reserves to the operating fund, but it must complete specific procedural steps.

1. Any withdrawal from reserves needs the signatures of at least two directors, or one director plus one officer who is not a director (Civil Code Section 5510(a)).

2. The board must provide advance notice to the membership under California Civil Code Section 5515(a). The board can consider a temporary transfer only to meet short-term cash flow requirements or other expenses. Before the board can vote on the matter, the intent to consider the transfer must appear as an agenda item in the formal board meeting notice delivered under Section 4920.

3. California Civil Code Section 5515(b) dictates what that meeting notice must tell owners. The notice must explain the specific reasons for the transfer. It must lay out options for how the money will be repaid. It must also disclose whether the board may consider a special assessment to fund the repayment.

4. If the board approves the transfer during the open meeting, it must satisfy California Civil Code Section 5515(c). The board must issue a written finding recorded in the meeting minutes. This recorded finding must explain the necessity of the transfer, and specify exactly when and how the borrowed money will be repaid to the reserve account.

5. California Civil Code Section 5515(d) establishes a strict deadline for repayment. The association must restore the borrowed money to the reserve fund within one year of the date of the initial transfer. The board is permitted to delay repayment past that one-year mark only if it provides the same formal membership notice and makes a new documented finding in the minutes that a delay serves the best interests of the common interest development.

6. If operating revenue fails to cover the repayment within the one-year window, California Civil Code Section 5515(e) requires the board to act. The board must levy a special assessment to recover the full amount owed to the reserve fund.

This recovery assessment is governed by California Civil Code Section 5605. Under Section 5605, special assessments levied by the board in any single fiscal year cannot exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of a majority of a quorum of the members.

To see how California sets wider benchmarks for community reserves, consult our summary of California HOA reserve requirements and the broader directory of California HOA laws.

Florida: Owner Vote Required

Florida does not provide a mechanism for the board to borrow from reserves on its own authority. Instead, Florida law treats any redirection of reserve funds to non-reserve purposes as a major community decision that requires approval from the owners.

For condominium associations, Section 718.112(2)(f)3 of the Florida Statutes states that reserve funds may be used only for authorized reserve expenditures. The only exception occurs when the use of reserves for other purposes is approved in advance by a majority vote of all the total voting interests of the association.

Furthermore, Florida condo legislation imposes an absolute restriction on certain reserve accounts. Under the same subparagraph of Section 718.112(2)(f)3, for budgets adopted on or after December 31, 2024, members of a condominium association that must obtain a Structural Integrity Reserve Study (SIRS) are prohibited from voting to use reserve funds for any purpose other than the replacement or deferred maintenance of the designated SIRS components.

Florida condos may also fund SIRS-item reserves with lines of credit or loans, and a loan needs a majority vote of the total voting interests.

Whether this absolute statutory bar also reaches non-SIRS reserve accounts in a building with a SIRS is not explicitly clarified in the statute; associations facing that question should check with an attorney licensed in Florida. For detailed rules on how these studies operate, read our guide on the structural integrity reserve study and our overview of Florida reserve requirements.

Florida homeowners associations under Chapter 720 operate under similar voting restrictions. Florida Statutes Section 720.303(6)(h) provides that reserve funds shall be used only for authorized reserve expenditures unless their use for other purposes is approved in advance by a majority vote at a meeting at which a quorum is present. While the voting threshold for an HOA is based on a quorum rather than all total voting interests, the board still possesses no independent power to move reserve cash into operating accounts without that member vote.

Neither Florida condominium statute nor Florida HOA statute includes an administrative temporary transfer provision comparable to California’s law. Without that advance owner vote, Florida law allows reserves to be used only for authorized reserve expenditures.

For more information on statutory requirements, see our guide to Florida condo association law and general Florida HOA laws.

Washington and Other States

Washington provides a statutory mechanism for reserve borrowing that falls between California’s one-year board process and Florida’s mandatory owner vote.

Under RCW 64.90.540, the board of an association governed by chapter 64.90 of the Revised Code of Washington (RCW) may withdraw funds from its reserve account to pay for unforeseen or unbudgeted costs that are unrelated to replacement costs. The statute lets the board make the withdrawal if it:

1. Records the withdrawal in the board’s meeting minutes.
2. Notifies each owner of the withdrawal.
3. Adopts a repayment schedule of no more than 24 months, unless the board determines that 24 months would impose an unreasonable burden.

Washington law also mandates ongoing transparency after the withdrawal occurs. Under RCW 64.90.540, when the association distributes its annual budget to owners, it must include a disclosure stating the original withdrawal amount, the remaining per-unit deficiency in the reserve fund, and the status of the repayment plan.

Furthermore, under RCW 64.90.535, every reserve disbursement requires the signatures of two officers or directors. The withdrawal must be accompanied by supporting documentation. In the case of an internal reserve borrowing, that documentation must include a written statement establishing the repayment plan.

As noted above, NRS 116.3115 limits Nevada reserves to major components and bars their use for daily maintenance, but that doesn’t settle whether a board can lend reserves to the operating fund; check the governing documents and ask a Nevada attorney.

In states without explicit statutes covering reserve borrowing, the association must review its recorded declaration and bylaws.

State	Statutory citation	Board authority to borrow?	Advance owner vote required?	Maximum repayment period
California	Civ. Code § 5510, § 5515	Yes, with agenda notice and recorded finding	No, unless repayment special assessment exceeds 5% cap	12 months (extensions require formal notice and finding)
Florida (Condos)	Fla. Stat. § 718.112(2)(f)	No	Yes, majority of total voting interests; SIRS funds cannot be repurposed	None specified (requires member vote)
Florida (HOAs)	Fla. Stat. § 720.303(6)(h)	No	Yes, majority of a quorum	None specified (requires member vote)
Washington	RCW 64.90.540, 64.90.535	Yes, for unbudgeted costs; requires two signatures	No, but requires owner notice and budget disclosures	24 months (unless board finds unreasonable burden)
Nevada	NRS 116.3115	Not addressed in NRS 116.3115	Not stated	Not stated

Better Options Than Raiding Reserves

Fannie Mae checks that budgeted reserves are at least 10 percent of the budget, or 15 percent for Full Review applications dated on or after January 4, 2027. Its Selling Guide does not address transfers to operating funds.

To see how these lending rules function, review our breakdown of Fannie Mae condo reserve requirements.

Before raiding reserves, boards should consider three standard alternatives to solve an operating shortfall:

1. Secure a commercial bank line of credit. An association line of credit allows the board to bridge an immediate cash flow gap without disturbing restricted reserve funds. To learn how associations obtain financing, see our guide on whether an HOA can get a line of credit.

2. Pass a dedicated special assessment. If the association faces an extraordinary operating deficit that cannot be resolved through normal monthly collections, levying a special assessment directly addresses the issue. In California, special assessments within 5 percent of budgeted gross expenses can be approved directly by the board, as explained in our detailed guide on the HOA special assessment.

3. Correct the underlying operating budget and reserve contribution plan. If your board wants to run these numbers itself, The HOA Guide’s Reserve Study Builder ($99) lists your components and works out your percent funded and a 30-year plan. It is not a professional reserve study.

For associations adjusting their annual accounting workflows, our step-by-step guides on how to create an HOA budget and HOA reserve fund accounting provide practical frameworks for tracking operating and reserve cash separately. Boards can also calculate their current metrics using our free HOA reserve fund calculator or draft a baseline component schedule with our free HOA reserve study template.

Bottom Line

An HOA cannot treat its reserve fund as a discretionary credit line to cover operating shortfalls. In California and Washington, the board can make a temporary transfer, but must follow set steps and repay within one year (California) or 24 months (Washington).

In Florida, a board has no statutory authority to borrow against reserves, and any non-reserve use requires an advance vote of the membership. For Florida condominiums with structural integrity reserve obligations, members can’t vote to use SIRS reserves for anything other than SIRS components.

If your community faces an operating deficit, check your state’s rules in HOA reserve requirements by state and your governing documents before moving any money. Explore alternative remedies, such as a bank line of credit or an operating special assessment, so reserve money stays available for repair and replacement.

This page is general information and is not legal advice. For questions about your governing documents or your state’s laws, speak with a licensed attorney in your state.