California HOA Reserve Requirements (Davis-Stirling)

A reserve study is required for an HOA in California under the Davis-Stirling Common Interest Development Act whenever the current replacement value of the community’s major components equals at least 50 percent of the gross annual budget, excluding the reserve account. Qualifying associations must complete an on-site visual inspection of accessible components at least once every three years and review the study every year.

The board must adopt a reserve funding plan at an open meeting, send owners an annual reserve summary with a calculated percent funded figure, and complete a detailed statutory disclosure form with the annual budget package. Under Assembly Bill 2050, mandatory statutory funding minimums will take effect on January 1, 2032.

What California Requires

A reserve study is mandatory for an HOA in California under California Civil Code Section 5550(a) if the current replacement value of the major components the association must maintain equals at least half of the gross budget, excluding the reserve account. If your community meets that 50 percent threshold, the board must satisfy four statutory requirements:

• Cause a reasonably competent and diligent visual inspection of accessible areas of major components to be conducted at least once every three years.
• Review the reserve study, or cause it to be reviewed, annually.
• Prepare a reserve funding plan.
• Distribute annual reserve disclosures and a reserve summary to all owners alongside the annual budget report.

The reserve study examines components that the association is obligated to repair, replace, restore, or maintain. Under Civil Code Section 5550(b), the study must evaluate major components that have a remaining useful life of under 30 years. Useful life means the total expected working lifespan of a component from installation to replacement. Remaining useful life means the estimated number of years left before the component reaches the end of its serviceability and requires replacement.

Section 5550(b) requires the study to include the estimated remaining useful life of each component, an estimate of the current replacement cost, and an estimate of the total annual contribution needed to fund repairs and replacements after subtracting existing reserve cash. Under Section 5550(c), utility infrastructure such as gas, water, and electrical lines count as major components to the extent that the association holds legal responsibility to maintain them.

For the list of components and how long each typically lasts, see reserve study components and their useful lives. For a broader overview of state statutes, review our guide to California HOA laws and our summary of the Davis-Stirling Act.

The Funding Plan and Yearly Disclosures

Three more sections of the Civil Code control what the board does with the study: 5560, 5565 and 5570.

The Reserve Funding Plan Under Section 5560

Civil Code Section 5560 requires the board of directors to adopt a reserve funding plan. This plan shows how the association will pay for the component replacements in the reserve study.

The funding plan must include a schedule showing the date and amount of any anticipated changes in regular assessments or special assessments needed to pay for scheduled work. Regular assessments are the standard recurring dues paid by owners, while a special assessment is a one-time levy used to cover capital expenses or emergency shortfalls. If an association faces a sudden shortfall, owners can consult our guide on the HOA special assessment.

The board must adopt the funding plan at an open board meeting where owners may attend and observe. Adopting the funding plan does not automatically increase assessments. An assessment increase remains a separate board action.

The Annual Reserve Summary Under Section 5565

Under Civil Code Section 5565, the board must prepare an annual reserve summary based on the most recent reserve study. All figures in this summary must be calculated using cash or cash equivalents. The summary must list:

• The estimated replacement cost, estimated remaining life, and estimated useful life of each major component.
• The estimated cash reserves needed.
• The actual cash reserves.
• The statutory percent funded, which is the percentage that actual cash reserves represent relative to estimated cash reserves needed.
• The current deficiency in reserve funding, expressed per unit.

Percent funded equals the reserve fund cash balance divided by the fully funded balance (the amount the association should have saved so far, given each component’s age and cost), measured at a stated beginning or end of the fiscal year. The Community Associations Institute (CAI) notes that percent funded is not by itself a measure of reserve adequacy. For a worked example, see how to work out HOA percent funded and how much an HOA should have in reserves.

The Assessment and Reserve Funding Disclosure Summary Under Section 5570

Under Civil Code Section 5570, associations must complete and distribute a formal Assessment and Reserve Funding Disclosure Summary to all members alongside the annual budget report.

The Section 5570 disclosure asks specific questions that the board must answer:

• A direct yes or no statement confirming whether projected reserve balances will be sufficient at the end of each of the next 30 years to meet anticipated repair and replacement needs.
• The association’s calculated percent funded for the current year and the projected percent funded for each of the next five budget years under the adopted funding plan.

For practical steps on integrating these disclosures into your association’s financial routine, see our guide on how to create an HOA budget and our overview of HOA reserve fund accounting.

AB 2050: The 2032 Minimum

On September 29, 2026, California enacted Assembly Bill 2050 (Chapter 796, Statutes of 2026). This legislation introduces a major change to California HOA reserve funding requirements by creating a mandatory contribution floor. The Governor’s office listed the bill in its September 29, 2026 signing announcement; details beyond the points below are in the chaptered text of Chapter 796, Statutes of 2026.

Starting January 1, 2032, every reserve study prepared under the Davis-Stirling Act must calculate and display a minimum reserve contribution level. The statute defines this level as the contribution that keeps the projected reserve balance from falling below zero over the 30-year study period.

Alongside this calculation mandate, AB 2050 adds Civil Code Section 5552. Starting January 1, 2032, Section 5552 will legally require association boards to fund their reserves at least at that minimum reserve contribution level.

Sections 5550 through 5570 require a study, a funding plan and disclosures; the new Section 5552 adds a required minimum funding level starting January 1, 2032.

For additional statutory context on how California regulates associations, visit our hub on California HOA laws.

Who Can Prepare the Study

California Civil Code Section 5550 requires a reasonably competent and diligent visual inspection of accessible areas, but the statute does not name any specific credential, state license, or designated profession for the preparer.

Some lenders may want a study prepared by an independent professional. Fannie Mae’s condo review also checks the budget’s reserve line; see Fannie Mae condo reserve requirements.

To compare professional providers, review our guide to the best HOA reserve study companies.

If your board wants to run these numbers itself, The HOA Guide’s Reserve Study Builder ($99) lets you list your components and works out percent funded and a 30-year projection. It is a planning tool and not a reserve study: it does not perform the Section 5550 visual inspection or satisfy state laws that require a professional preparer or Fannie Mae’s reserve-study criteria.

We also provide a free reserve study template and an interactive HOA reserve fund calculator to test various balance scenarios. To understand what happens when balances run dry, review our guide on underfunded HOA reserves.

Bottom Line

If your association’s major components equal at least half of the gross budget excluding reserves, ensure your board has a visual inspection done at least once every three years, reviews the study annually, adopts a reserve funding plan at an open meeting, and distributes the mandatory disclosures under Sections 5565 and 5570 with the annual budget package.

Boards can prepare now for the standards taking effect in 2032 under AB 2050. Review your latest study, check your current percent funded, and model whether your planned annual contributions will keep your projected reserve cash balance above zero across the entire 30-year horizon.

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.