Reserve funds and reserve studies
Can this association
pay for its own roof?
By Devin Day, Operations Officer & licensed MLO, NMLS 2721275 · Reviewed by Timmy Fredrick Nash, Broker-in-Charge · Updated August 15, 2026
Reserves are the difference between a repair that is already funded and a repair that arrives as a bill in your mailbox. Here is how to read a reserve study and a balance sheet before you buy.
If you have any questions while reading, call 854.333.2135.
The direct answer
What reserves are, and why they decide your risk
An association runs two pots of money. The operating budget pays this year's bills. The reserve fund saves for the big things that are certain to come and expensive when they do: the roof, the elevators, the paving, the pool, the siding.
A reserve study is the report that works out how much should be in that second pot. It lists every major component, estimates its remaining life and replacement cost, and calculates what the association ought to set aside each year to be ready.
If the reserve is healthy, the next roof is already paid for. If it is not, the roof still gets replaced, and it arrives as a special assessment with your name on it.
How to read one
What we look at, in order
- ✓Percent funded. What the association has against what it should have by now. Higher is safer. A very low figure with ageing components is the clearest warning sign there is.
- ✓The age of the expensive components. Roof, elevators, HVAC, balconies. Compare remaining life against the reserve balance.
- ✓Annual contribution versus recommendation. A study that says contribute a certain amount, and a budget contributing far less, is a decision to assess later.
- ✓How old the study is. A reserve study from years ago, priced before recent construction-cost increases, understates what everything now costs.
- ✓The operating budget's margin. An association with no slack in operations will raid reserves for a bad year.
Want us to look at it for you?
The lender's view
Why reserves can change your financing
This is the part buyers rarely connect. Lenders review the building as well as the borrower. Fannie Mae generally expects a condo association's budget to put at least 10 percent of assessment income into reserves, and has announced a rise to 15 percent for loan applications dated on or after January 4, 2027.
An association that does not meet the standard can push the whole building outside conventional financing, which changes which loans work and shrinks the pool of buyers when you go to resell. That review is explained on our non-warrantable condos page.
Sources. South Carolina Department of Consumer Affairs, 2026 Homeowners Association Annual Report (calendar year 2025 data), and the South Carolina Homeowners Association Act, S.C. Code Title 27, Chapter 30. Verified July 2026. This is general information about how associations work, not legal advice.
Not sure whether an association is healthy?
Send the name. We read the study, the budget and the balance sheet and give you a straight answer.
Common questions
Reserves FAQ
What is an HOA reserve fund?
Money the association saves for big repairs that are coming but have not happened yet: roofs, elevators, paving, pools. It is separate from the operating budget, which pays this year's bills.
What is a reserve study?
A report that inventories the association's major components, estimates how much life each has left and what replacement will cost, and says how much the association should be setting aside each year. It is the closest thing to a financial x-ray of a building.
What does percent funded mean?
It compares what the association actually has in reserve against what it ideally should have at this point in the components' lives. Higher is safer. A low percentage means the money for the next big repair is not there yet, and the gap usually closes with a special assessment.
Does South Carolina require a reserve study?
South Carolina does not impose a general statutory reserve-study or reserve-funding requirement on associations the way some states do. What governs is the association's own documents, and, if you are financing, the lender's project requirements.
Do lenders care about reserves?
Yes, and increasingly so. Fannie Mae generally expects a condo association's budget to allocate at least 10 percent of assessment income to reserves, and has announced an increase to 15 percent for loan applications dated on or after January 4, 2027. A building that fails can become non-warrantable.
Legal notice. Chapter3 Realty Corp is a licensed South Carolina real estate brokerage. We are not attorneys and nothing on this page is legal advice. Homeowners association documents, South Carolina law and the facts of your situation all differ, and only a licensed South Carolina attorney can advise you on your rights or obligations. Statutes and association rules change; information here was verified in July 2026 and may not be current when you read it. Always read the association's own recorded documents and, where the stakes warrant it, consult an attorney.