This work traces back to a tragedy. In June 2021, the partial collapse of Champlain Towers South in Surfside, Florida, took the lives of residents and forced the entire condominium industry to confront hard questions about aging buildings, deferred maintenance, and financial planning. The Community Associations Institute, the leading industry organization for community associations, dedicated years of research to the question of what could be done differently. Its June 2026 Condominium Safety Public Policy Report is the result, and it's worth understanding, even for Boards far from the coastline where that tragedy occurred.

We explore reserve planning and financial stewardship at length in Dollars, Decisions, and Better Stewardship, the second volume of the Lessons from the Neighborhood series. Learn more at www.LessonsFromTheNeighborhood.com.

One note before we go further: if your community is a homeowners association rather than a condominium, don't stop reading. CAI's report is titled around condominium safety, and Surfside was a condominium tragedy, but the underlying reserve-funding challenge doesn't respect that line. Plenty of single-family HOAs carry the same kind of shared infrastructure and obligations, clubhouses, pools, private roads, gates, retaining walls, roofs and other exterior building responsibilities, landscaping, and stormwater systems, that eventually need the same kind of planning a condo's roofs and elevators do. Most of what follows applies just as much to an HOA Board as it does to a condo Board.

Why this report exists

CAI's report grew out of task forces convened in the weeks after the Surfside collapse, bringing together reserve specialists, engineers, attorneys, insurance professionals, developers, and community association managers to study what changes could help other communities avoid a similar tragedy. The report covers two related but distinct topics: reserve studies and funding, and building maintenance and structural integrity.

A reserve study, in plain terms, is a long-range financial planning tool. It examines the physical condition of a community's major shared components, roofs, elevators, pools, paving, and similar assets, and pairs that assessment with a funding plan intended to cover future repair and replacement costs without relying on a surprise special assessment.

It is important to understand what a reserve study is not. CAI's own report is direct on this point: a reserve study is a budgeting tool based on the expected life cycle of components, not an engineering evaluation of whether a building is currently safe. Structural and facade inspections are a separate, related practice.

What the report says about North Carolina and South Carolina today

Here's the part most Carolina Boards haven't seen. CAI's report includes a state-by-state summary of reserve fund laws, and as of June 2026, according to the report neither North Carolina nor South Carolina has a statutory requirement to conduct a reserve study or to fund reserves.

In North Carolina, community associations may adopt budgets that include reserves, and public offering statements must disclose whether a reserve amount exists, but nothing in the statutes requires an association to commission a study or maintain a funded reserve account. South Carolina's statutes are similarly silent on the point. That puts both states outside the group CAI identifies as currently requiring reserve studies (a group that includes California, Colorado, Delaware, Florida, Hawaii, Maryland, Nevada, Oregon, Tennessee, Utah, Virginia, and Washington State) and outside the group requiring reserve funding specifically.

This doesn't mean Carolina communities can't or don't maintain reserves. Many do, either because their own governing documents require it or because their Boards have simply chosen good practice over the legal minimum. But a legislative gap isn't the same thing as a free pass, and that's worth unpacking before any Board treats this as a non-issue.

So does that mean your Board has no obligation at all?

Not quite. The absence of a state mandate is only part of the picture. At least three practical realities, plus one legal doctrine that never goes away, can put a Board in a position where reserve funding stops being optional, even without a statute requiring it.

The developer disclosure that doesn't carry forward.

Under the North Carolina Condominium Act, a declarant selling units is generally required to disclose the association's budget in the public offering statement, including whether an amount has been set aside as a reserve for repairs and replacement. That gives early buyers real visibility into what the developer is or isn't saving for common elements. But that disclosure obligation is tied to the declarant's sales process. Once the community transitions to homeowner control, the statute goes largely silent on any ongoing requirement to study or fund reserves going forward. The starting point the developer disclosed doesn't come with instructions for what happens next.

What your own governing documents already say.

State statutes are only one layer. A community's declaration of covenants, conditions and restrictions, and bylaws function as a binding contract among the association and its owners. If those documents specify that the Board must maintain a reserve account, or fund it to a particular level, that obligation exists regardless of what state law does or doesn't require. Failing to follow it isn't just a missed best practice, it's a breach of the community's own governing framework. This is one of the first things worth checking before assuming "no state statute" means "no obligation."

The mortgage market has its own rules.

This point applies specifically to condominiums, not typical single-family HOAs. Even where state law is silent, Fannie Mae and Freddie Mac, which together stand behind a large majority of conventional mortgages nationally, require condominium associations to meet minimum reserve funding standards before loans in that community can be sold on the secondary market. That minimum has historically required associations to set aside a meaningful share of their annual budget for reserves, and lenders have been raising the bar in recent years, with further tightening already announced for the near future, including stricter expectations for how a reserve study supports the funding level an association actually budgets. An association that falls short can be flagged as ineligible for conventional financing, which can directly affect whether owners can sell their units and what buyers are willing to pay for them. A statute doesn't have to require a reserve fund for a lender to require one anyway.

The fiduciary duty that doesn't go away.

Finally, even in states with no reserve statute at all, Board members owe a fiduciary duty to the association, generally understood to include reasonable care for the community's common elements. Courts in a number of states have found that a Board that knowingly lets infrastructure deteriorate, with no plan and no funds set aside, can face claims of negligence down the road. The business judgment rule typically protects Boards that make informed, good-faith decisions, and a documented reserve study is often exactly the kind of record that shows a Board was acting on real information rather than guesswork.

Taken together, these four points are why "our state doesn't require it" is rarely the end of the analysis, even for communities that are managing perfectly reasonably today.

Why CAI is pushing for a national standard

CAI's official policy position, approved in May 2025, supports mandating reserve studies and funding for all community associations, new and existing, and opposes legislation that would let owners waive or opt out of that funding once required. Since Surfside, a growing number of states have passed new laws addressing reserves, structural inspections, or both.

There's a real cost consideration on the other side of that push, and CAI's own recommendations acknowledge it. Requiring full reserve funding overnight could create financial strain for communities that have gone years without saving for major repairs. That's part of why CAI's recommended approach includes a practical transition period, allowing associations to phase in required funding over time rather than demanding it all at once, along with hardship provisions some states have already adopted. The tension is a familiar one: protecting owners from being blindsided by deferred maintenance costs, without imposing sudden financial hardship on the same owners in the name of protecting them.

Research cited in the report drives home why the stakes are real. A Stanford University analysis on life cycle cost planning found that the longer a repair is deferred, the more it costs, and the difference isn't small; deferred maintenance can end up costing dramatically more than staying current on a routine schedule. Separately, a 2026 homeowner survey found that most residents already support annual investment in reserves, even where nothing requires it.

What this means for your Board right now

Even setting aside the governing-document, lending, and fiduciary-duty realities above, treating this purely as a matter of legal minimums misses the point. A funded reserve, built on a real study rather than a guess, is one of the clearest ways a Board can protect property values, avoid contentious special assessments, and give homeowners an honest picture of what's coming.

None of this is a knock on Boards that haven't gotten there yet. Most communities without a funded reserve aren't in that position because anyone was careless. They're there because homeowners push back on fee increases, because utility and maintenance costs have often been climbing faster than general inflation in recent years, and because a Board balancing today's budget against next decade's roof is a genuinely difficult position, not a simple oversight. It's a lot like retirement savings. The ideal is starting with your first paycheck, but almost nobody does, and starting later is still meaningfully better than not starting at all. A community five or ten years behind on reserves isn't beyond help. It just means the plan has to be realistic about the runway that's left, rather than pretending the runway is longer than it is.

It's also worth being upfront that steady reserve funding isn't the only approach some communities use, and CAI's recommendation isn't the only path a governing document might allow. A number of declarations and bylaws explicitly permit a Board to address major repairs through a special assessment when the need arises, or through borrowing against future assessment income, rather than building a standing reserve fund year over year. Some Boards choose this deliberately, on the reasoning that it avoids collecting and holding large sums well in advance of a repair that may still be years off. We generally recommend the reserve-study approach CAI describes, because it tends to spread cost more predictably and gives homeowners more advance notice than a large assessment sprung on short notice. But whether an alternative approach is sound for a particular community depends on what the governing documents actually allow, the association's borrowing capacity, and how a special assessment of that size would land on homeowners when the bill actually comes due. Any Board considering an alternative to steady reserve funding should work through the specifics with the association's attorney and a CPA familiar with community association finance, rather than assuming either path is automatically the right one.

We once worked with a community that had never commissioned a reserve study and hadn't planned for a special assessment or loan either, for exactly these kinds of reasons. Several buildings needed roof replacement within the same two-year window, and there was no dedicated fund to draw from. The special assessment required to cover it landed hard, several thousand dollars per unit, all at once, and it created real strain for homeowners on fixed incomes and real tension on the Board. A neighboring community of similar age and size had been funding a modest reserve for years based on a professional study. When their roofs needed the same work, the cost came from reserves that had already been building quietly in the background. Neither Board did anything wrong on purpose. One simply started sooner, and the difference showed up years later in how their homeowners experienced the exact same problem.

Building safety inspections: a related but separate issue

CAI's report also recommends a structural inspection framework for aging buildings, an initial inspection around 10 years, another at 20, and then every five years after that, along with separate facade inspections for buildings four stories or taller. States like Florida and Virginia have already adopted mandatory inspection laws following Surfside. As with reserve studies, nothing in the report suggests North Carolina or South Carolina currently has a statewide mandate along these lines, though local building codes can vary, so it's worth checking directly with your local building authority if your community includes taller or older structures.

Before your Board acts

Nothing here should be read as legal or financial advice, and reserve funding decisions should be made with input from a qualified reserve specialist, your association's attorney, and your management team, not from a summary of a national report. Laws in this area are changing quickly; CAI's report notes that a number of states have updated their requirements since 2021, and more legislative activity is likely.

For the full report, including the complete state-by-state summary and CAI's detailed policy recommendations, visit CAI directly at www.caionline.org, or www.condosafety.com, which CAI maintains specifically to track ongoing legislative developments in this area.

Have questions about your own community?

If your community work with AMG, reach out to your community manager. They can help you think through where your community stands and what a reasonable next step looks like. If you're not yet an AMG client, our client services team INSERT EMAIL HERE is happy to point you toward a qualified reserve specialist, CAI's resources, or other professionals who can help, whether or not that leads to working with us.

Frequently Asked Questions

Does North Carolina require HOA reserve studies?

Not currently. According to CAI's June 2026 report, North Carolina's community association statutes allow associations to budget for reserves but don't require a reserve study or reserve funding. Laws can change, so Boards should confirm current requirements with legal counsel.

Does South Carolina require HOA reserve funding?

Not currently. CAI's report indicates South Carolina has no statutory requirement to conduct a reserve study or fund reserves as of June 2026. As with any legal question, confirm current requirements with your association's attorney.

What is a reserve study, and why get one if it isn't required?

A reserve study is a long-range financial planning tool that assesses the condition of a community's major shared components and creates a funding plan to cover future repair and replacement costs. Even without a legal mandate, many communities use one to avoid unexpected special assessments and give homeowners a realistic picture of upcoming costs.

Can a lack of reserve funding affect a condo owner's ability to sell or get a mortgage?

Yes, for condominiums. Fannie Mae and Freddie Mac require condominium associations to meet minimum reserve funding thresholds before loans in that community can be sold on the secondary market, and that minimum has been trending upward in recent years, with further tightening already announced for the near future. Associations that fall short can be flagged as ineligible for conventional financing, which can affect both individual sales and overall property values.

Can a community fund major repairs through special assessments or borrowing instead of building a reserve fund?

In some cases, yes. Many governing documents allow a Board to address major repairs through a special assessment or a loan when the need arises, rather than building a standing reserve. CAI's best-practice recommendation, and ours, is a funded reserve based on a professional study, but Boards considering an alternative approach should review it carefully with the association's attorney and a CPA familiar with community association finance before relying on it.

Paul's Key Guidance

Here's what I'd tell any Board reading this, whether your state requires a reserve study or not. Start with three checks, not one.

Read your own declaration and bylaws to see whether they already obligate you to fund a reserve, regardless of what state law says.
If you're a condominium association, find out where your current reserve allocation stands against your lender's requirements, since those minimums have been rising and more changes are already on the way.
And commission a reserve study from a qualified reserve specialist regardless of either answer, then use it to build a funding plan your community can actually sustain, phasing toward full funding over several years if that's what it takes.

If your community is starting from zero, that's a completely normal place to be, not a mark against your Board. The goal isn't to catch up overnight. It's to start the clock now, with a plan that's honest about how much runway you actually have. The best time to start funding reserves was years ago. The second-best time is the next budget cycle.

About the Author

Paul Mengert, CMCA®, PCAM®, is a visionary leader, award-winning educator, and transformative strategist in community association management. With over 40 years of experience, he is the founder and CEO of Association Management Group (AMG), an AAMC®-accredited firm that began in 1985 with three Greensboro, North Carolina, associations, and is now a leading, nationally respected management company. Today, AMG serves over 30,000 property owners across the Carolinas, stewarding communities with a combined asset value exceeding $5 billion.

Paul was named a Community Associations Institute (CAI) Educator of the Year and serves as senior faculty there. He is a longtime guest lecturer at Wake Forest University School of Law and teaches in the Harvard Business School alumni program at Queens University, focusing on the intersection of governance, finance, law, and human dynamics.

Paul's influence extends beyond community associations. He has advised the U.S. Department of State on housing initiatives in the former Soviet Union and served five terms as Chair of the Piedmont Triad International Airport Authority. Recognized as a "Most Admired CEO" by the Triad Business Journal, Paul is the author of the acclaimed Lessons from the Neighborhood book series. Through writing, speaking, and consulting, he equips community leaders with practical frameworks for governance excellence, while preserving the human touch that makes neighborhoods thrive.

Learn more at www.amgworld.com and www.LessonsFromTheNeighborhood.com.

Author's Note: I have spent more than 40 years working with community association Boards and managers throughout the Carolinas. My perspective is based on practical experience in community association management, governance, and financial planning. I am not an attorney, and nothing in this article is intended to provide legal or financial advice. Statutory summaries referenced here come from CAI's June 2026 Condominium Safety Public Policy Report, North Carolina General Statutes, and publicly available Fannie Mae guidance, and reflect the law and lending standards as understood at the time of writing; laws and lending guidelines change, and this article should not be relied on as a current or complete statement of North Carolina or South Carolina law, any community's governing documents, or any lender's requirements. Boards should confirm current requirements with qualified legal counsel and consult a qualified reserve specialist before making funding decisions.