SO CAN ASSOCIATIONS WAIVE ANY RESERVES?

It’s time to pass your 2026 budget.  If you’re in a condo with 3 habitable stories or more, you know that you must have SIRS reserves in your budget and that they cannot be waived.  When teaching my seminar however, it appears that many people are confused.  They believe that no reserves of any kind can be waived.  They are wrong.  Let’s clarify.

If you performed your Milestone Inpection Within the Last 2 years

For a budget adopted on or before December 31, 2028, (so this includes up to and including the association’s 2029 budget) if the association has completed a milestone inspection within the previous 2 calendar years, the board, upon the approval of a majority of the total voting interests of the  association, may temporarily pause, for a period of no more than two consecutive annual budgets, reserve fund contributions or reduce the amount of reserve funding for the purpose of funding repairs recommended by the milestone inspection. An association that has paused reserve contributions under this subparagraph must have a structural integrity reserve study performed before the continuation of reserve contributions in order to determine the association's reserve funding needs and to recommend a reserve funding plan. So to be very clear here……….this only applies to associations that have had their milestone inspection, meaning their 30, 40 or 50 year inspection) within the previous 2 calendar years.  This does not mean that starting immediately, every condo gets to pause reserve fund contributions for two years.  That is not what this new law is saying……. You only get to pause reserve fund contributions for up to two years, if you had your milestone inspection within the last two years. And this is being allowed in order that you have the funds to make the repairs required by the milestone inspection.

SUPPOSE YOU HAVE LESS THAN 3 HABITABLE STORIES?

If you are a condominium that has less than 3 habitable stories --- the owners can vote to waive any and all reserves.  A majority vote of all owners is required.

AND EVEN IF YOU ARE IN A CONDO THAT HAS 3 HABITABLE STORIES OR MORE

Even if you are in a condominium that has 3 habitable stories or more……..you can waive any and all non-sirs reserves.  For example, reserves for the elevators, the swimming pool, the carpeting and tile. A majority vote of all owners is required.

Remember, unit owners have the right to vote to waive reserves by using a limited proxy form.  However:

Proxy questions relating to waiving or reducing the funding of reserves or using existing reserve funds for purposes other than purposes for which the reserves were intended must contain the following statement in capitalized, bold letters in a font size larger than any other used on the face of the proxy ballot:

WAIVING OF RESERVES, IN WHOLE OR IN PART, OR ALLOWING ALTERNATIVE USES OF EXISTING RESERVES MAY RESULT IN UNIT OWNER LIABILITY FOR PAYMENT OF UNANTICIPATED SPECIAL ASSESSMENTS REGARDING THOSE ITEMS.

This is complicated stuff.  If you’re not sure what to do, get an opinion from your association’s counsel before that budget gets sent to the owners.

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Don't forget to also watch Episode 33 where Eric dove into this topic!