Reserve study basics for Texas boards

There is no Texas statutory reserve-study mandate comparable to Florida's structural integrity reserve study. Chapter 82 touches reserves in three places, and all three are narrow. Section 82.112(a) provides that reserves and working capital collected from purchasers are not to be used for operations during declarant control. Section 82.112(f) permits the declaration to allow reserves to accumulate without a cap. Section 82.157(a) requires the resale certificate to state reserves along with the capital expenditures approved for the next twelve months.

Read together, those provisions treat reserves as something the declaration authorizes and the market inspects, rather than something the code requires. Your reserve policy therefore comes from the declaration first and from the board's own judgment second.

Start by reading what your declaration says. Some Texas declarations require a reserve fund and set a minimum contribution. Some authorize one and are silent on amount. Some say nothing at all. The three cases call for three different board conversations, and getting them confused is how a board ends up adopting a reserve policy the documents do not support.

A reserve study has a physical half and a financial half. The physical analysis inventories the components the association is obligated to repair or replace, each with an estimated useful life, a remaining useful life, and a current replacement cost. The financial analysis turns that inventory into a funding plan: the annual contribution that puts the money in place before each component reaches the end of its life.

The inventory is where quality lives. Check it against what your association actually maintains: roofs by section, pool shell and pool equipment separately, painting by elevation, paving by area, gates, pumps, fencing, amenity buildings, playground equipment, and any shared utility infrastructure. A short inventory produces a comfortable contribution and an uncomfortable decade.

Remaining useful life is an estimate with wide error bars. Where the board knows something the specialist cannot see from a walk-through, such as a roof that has been repaired repeatedly, say so during the engagement rather than after the report is bound.

Percent funded compares the reserve balance the association holds against the balance it would hold if contributions had exactly kept pace with the deterioration that has already happened. It is a position, not a grade. A hundred percent funded does not mean everything can be replaced tomorrow; thirty percent funded does not mean the association is failing.

In a state with no statutory reserve mandate, percent funded is the number that does the persuading. It is what a lender's condominium questionnaire asks about, what a buyer's agent looks for, and what an owner arguing against a contribution increase has to answer.

Track the trajectory as well as the level. A board that inherits a low percent funded and can show three years of improvement is telling a very different story from one whose figure has been flat while replacement costs rose.

Not at the failure. At the closing. Under § 82.157(a) the resale certificate must state the reserves and the capital expenditures approved for the next twelve months, together with unpaid common expenses or special assessments, unsatisfied judgments, and pending suits. Under § 82.157(c) a purchaser, lender, or title insurer may rely on the certificate, and the association may not deny the validity of its own statements.

That is the mechanism by which a thin reserve becomes a market problem long before it becomes a repair problem. A community whose certificates report low reserves and an approved capital program it has not funded is a community where lenders start asking questions.

The same certificate has a ten day production clock under § 82.157(b), which is a reason to keep the reserve figure current and readily available rather than reconstructing it each time a unit sells.

Full funding targets a hundred percent funded and gives the highest, steadiest contribution. Threshold funding holds the balance above a chosen floor. Baseline funding keeps the balance above zero and nothing more, which gives the lowest contribution and the highest likelihood of a special assessment. These are professional practice conventions rather than Texas statutory categories, and a study will normally model more than one.

Pick one, record the choice and the reasoning in the minutes, and revisit it when the study is updated. Boards that never choose default to baseline by accident, and then re-argue the same question every budget season.

Then model the alternative and show both to owners. A contribution increase presented next to the special assessment it prevents is a much easier conversation than the same increase presented alone.