California guide
California reserve studies
California is one of the few states that mandates reserve studies but not reserve funding. Civil Code §5550 requires associations to conduct a reserve study at least every three years, review it annually, and disclose percent funded in the pro-forma operating budget (§5565).
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What the law does not do is require the association to fund reserves to the study's recommended level. The result is a state full of current, professionally prepared reserve studies sitting alongside reserve balances that are deliberately low — which makes reading the percent funded and funding plan essential.
What §5550 requires
An association must conduct a reserve study at least every three years based on a visual inspection of major components, review it annually, and incorporate it into the budget. The pro-forma budget must disclose the current reserve balance, the percent funded, and the funding plan to address the components. The study and disclosures are mandatory; the funding level is not.
Reading percent funded
Percent funded compares the reserve balance to the fully funded ideal for the components' age and condition. Below roughly 30% is generally weak, 30–70% is a caution zone where the funding trend matters as much as the snapshot, and above 70% is comparatively healthy. Because California does not mandate funding, low percent funded is common and legal — but it predicts future special assessments.
The SB 326 connection
SB 326 inspection findings must be incorporated into the reserve study. A building with identified elevated-element repairs should show those costs in the study. If the inspection found work but the study and budget do not reflect funding for it, that gap is a leading indicator of a special assessment.
Funding plan and assessment trajectory
Read the funding plan: is the association on a path to close the gap through gradual contributions, or is it relying on future special assessments? Compare the planned reserve contribution to the study's recommendation. A persistent shortfall between the two is where out-of-pocket risk concentrates.
California legal references
- Cal. Civ. Code §5550 — Reserve study (at least every 3 years)
- Cal. Civ. Code §5565 — Reserve funding disclosure in the budget
- Cal. Civ. Code §5551 — SB 326 inspection findings into the reserve study
Informational only. Not legal advice. Always confirm against current statute and counsel.
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Find a California specialist →Reviewer's checklist
- Confirm the reserve study is current (within three years) per §5550
- Read the percent funded disclosed in the pro-forma budget (§5565)
- Compare the actual reserve contribution to the study's recommended contribution
- Confirm SB 326 inspection findings are reflected in the study
- Identify large near-term components — roof, balconies, envelope, elevators
- Read the funding plan: gradual contributions vs reliance on special assessments
- Review the reserve balance trend over the last several years
- Check the minutes for any reserve-funding or special-assessment discussion
- Ask whether reserves are earmarked against any known repair or claim
- Weigh the reserve picture against the building's age and deferred maintenance
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