Last updated 2026-08-14
TL;DR
Fannie Mae doesn't mandate a formal 'reserve study' by name. It requires associations to budget at least 10% of assessment income for reserves unless a qualified reserve/replacement study justifies less. In Florida, SIRS-covered buildings must follow the Fla. Stat. 718.112(2)(g) study instead, and lenders increasingly cross-check both.
What is a reserve study?
A reserve study is an engineering and financial analysis that looks at a building's major shared components (roof, plumbing risers, elevators, pavement, structure) and estimates two things: how much life each component has left, and how much it will cost to repair or replace it. Most studies come in two parts, a physical condition assessment done by a licensed engineer or reserve specialist, and a funding plan that spreads the projected costs over a set number of years so the association isn't hit with the full bill at once. In Florida, condo and co-op buildings three stories or higher have a specific, statutory version of this called the Structural Integrity Reserve Study, or SIRS, defined under Fla. Stat. 718.112(2)(g) [1]. That's a narrower, load-bearing-and-life-safety focused study than the general reserve studies used in many other states, and it's the one your milestone inspection and reserve funding obligations actually hinge on. If your building needs one, start with a reserve study for condo association buildings before assuming a generic study covers you.
What is a reserve study for HOA associations (as opposed to condos)?
Homeowners associations (single-family home HOAs, not condos) are not currently subject to Florida's SIRS law. SIRS under 718.112(2)(g) applies to condominium associations, and a parallel requirement for cooperatives lives in Fla. Stat. 719.106(1)(l) [2]. HOAs governed under Chapter 720 don't have a statutory reserve study mandate the way condos do, though many HOA declarations still require reserve funding or a study as a matter of contract, not statute. That said, plenty of HOAs voluntarily commission a reserve study anyway, because lenders (Fannie Mae included), insurers, and buyers increasingly ask for one. A hoa reserve study works the same way structurally as a condo study, it just isn't legally mandatory for most Florida HOAs the way SIRS is for condos. Confirm your specific obligations with your association's counsel, since some county or municipal codes layer on additional requirements.
Does Fannie Mae require a reserve study?
Not by that specific name, and not universally. Fannie Mae's Selling Guide (section B4-2.3-02) requires condo and co-op associations to allocate at minimum 10% of their budgeted assessment income to reserves for replacement, unless the association has a reserve or 'component' study performed within the past three years that documents a lower funding level is adequate [3]. This is a budget adequacy test, not a mandate that every association hire a reserve engineer. In practice this means: if your association has no study, lenders reviewing your project for warrantability will default to checking whether 10% of assessments goes to reserves. If you do have a current study (or a Florida SIRS report, which many lenders now accept as functionally equivalent for this purpose), the underwriter can instead check whether your funding matches that study's recommended contribution. Fannie Mae's guide states associations must budget "an amount that is at least 10% of the budgeted gross income for the reserve fund unless a reserve study... supports a different amount" [3]. That's the actual rule; everything else is interpretation layered on top by individual lenders.
How does Florida's SIRS law interact with Fannie Mae's reserve rule?
This is the part that trips up a lot of Florida boards. SIRS under 718.112(2)(g) requires associations to get a study done by a licensed engineer or architect covering specific structural and life-safety components (roof, load-bearing walls, primary structural systems, fireproofing, plumbing, electrical, waterproofing, and more), and then fund reserves for those items with no ability to waive or reduce funding for them, effective for reports due starting December 31, 2024 for buildings reaching their milestone threshold [1]. Fannie Mae's 10% rule is a separate, nationwide underwriting standard that predates SIRS and applies regardless of state law. What happens in practice: a lender underwriting a loan in a SIRS-covered building will typically ask for both the SIRS report and evidence the association is actually funding the components at the level the report recommends. If your association has a current SIRS report showing full funding for structural items but is still budgeting only 5% of assessments overall for non-structural reserves (paint, pool furniture, general common areas), some lenders may still flag the project during a warrantability review, because SIRS doesn't cover everything Fannie Mae's 10% test contemplates. This is a gap that catches boards off guard; the fix isn't complicated, it's just often overlooked.
What is an HOA assessment?
An assessment is money the association charges owners beyond (or instead of) the general operating budget, usually to cover reserves, a specific capital project, or an unexpected shortfall. There are two broad types. Regular assessments are the recurring monthly or quarterly dues that fund normal operations and scheduled reserve contributions. Special assessments are one-time (or limited-duration) charges levied when the reserve fund can't cover a needed repair, when insurance premiums spike, or when a milestone inspection or SIRS report turns up structural work that wasn't budgeted. Under Florida law, boards generally have authority to levy special assessments for the purposes stated in the declaration and bylaws, and notice requirements apply; owners typically must receive advance written notice of a board meeting where a special assessment will be considered, per Fla. Stat. 718.112(2)(c) [1]. If you're facing one, hoa special assessment breaks down the notice and voting mechanics in more detail. Whether a specific assessment is properly authorized under your documents is a question for your association's attorney, not something a statute alone answers.
How much should an HOA have in reserves?
There's no single dollar figure that applies to every building, because reserve adequacy depends on the size, age, and component inventory of the property, not a flat percentage of the budget. The honest answer is: enough to fully fund the projected replacement cost of every major component, spread across its remaining useful life, per an actual reserve study or SIRS report. That's very different from Fannie Mae's 10%-of-income floor, which is a minimum underwriting screen, not a target for good reserve health. For Florida condos hitting the SIRS threshold (three stories or more, generally applying to buildings that reached their 25-year or 30-year milestone age as of the relevant statutory date), the law now removes the board's ability to vote to waive or reduce reserve funding for the specific structural components named in 718.112(2)(g) [1]. That's a meaningful shift from pre-2022 law, where boards could vote annually to underfund or skip reserves entirely for many components. If your building isn't SIRS-covered, funding levels are still governed by your declaration and by ordinary prudence, not a statutory floor, so 'how much' really comes down to what your engineer's study says the components will cost.
How much does a reserve study cost?
Costs vary widely by building size, component count, and whether you need a full engineering-grade SIRS report or a lighter financial-only study. As a rough range reported across the industry, a basic reserve study for a small to mid-size association can run somewhere in the low thousands of dollars, while a full Florida SIRS study involving a licensed engineer's site visit, component-by-component life expectancy analysis, and funding schedule for a larger high-rise commonly runs into the five-figure range, sometimes higher for very large or complex buildings. Florida's DBPR does not publish a fee schedule for these studies since pricing is set by the private engineering and reserve-specialist firms performing the work, not the state. Cost drivers include building height and unit count, how many separate structural and mechanical systems need inspection, whether destructive or invasive testing is required to assess things like rebar corrosion or waterproofing membranes, and how far the last inspection was from your milestone deadline (rushed timelines sometimes cost more). Boards should get at least two or three quotes from licensed engineers before committing, and should confirm the engineer is licensed in Florida per DBPR's licensing portal [4], since SIRS reports must be prepared by a licensed engineer or architect under the statute.
Are HOA special assessments tax deductible?
Generally, no, not for the individual homeowner's federal income tax return, if the assessment covers general capital improvements or reserve replenishment. The IRS treats special assessments the way it treats regular HOA dues for a personal residence: they're a personal living expense, not deductible, similar to homeowner association dues [5]. There are narrow exceptions. If part of the assessment is used for a capital improvement, it may increase your cost basis in the property, which can reduce capital gains tax when you sell, though it doesn't reduce your current-year taxable income. If the unit is a rental property, the calculus changes: special assessments tied to repairs may be deductible as a rental expense in the year paid, while those tied to capital improvements to the property typically must be depreciated over time rather than deducted immediately. This is genuinely fact-specific and depends on whether the IRS would characterize the underlying work as a repair or an improvement under IRS Publication 527 [6]. Talk to a CPA before assuming either way; this is not something a board or a general article can determine for your specific tax situation.
What triggers a special assessment after a milestone inspection or SIRS report?
Milestone inspections (required for buildings three stories or higher at 30 years old, or 25 years old if within three miles of the coast, under Fla. Stat. 553.899 ) and SIRS reports frequently uncover deferred structural work that reserves haven't been funding, because pre-2022 law let many boards waive reserve contributions by owner vote. When that happens, boards typically have three options: a special assessment, a loan against future assessments, or some blend of both. The amount and timing depend entirely on what the engineer's report finds and what the association's existing reserve balance can absorb. A board facing a six or seven figure structural repair bill with a thin reserve fund has fewer good options than one that's been fully funding SIRS components since 2022. This is exactly why getting ahead of the study, rather than reacting to it, matters: boards that know their numbers early can phase assessments, explore financing, or adjust budgets over a couple of years instead of hitting owners with a single shock bill.
How do lenders actually check reserve funding during a condo loan review?
Lenders reviewing a condo project for warrantability (whether it qualifies for conventional financing) typically request the association's budget, most recent reserve study or SIRS report, and financial statements, then run the numbers against Fannie Mae's Selling Guide criteria. The key check is whether at least 10% of assessment income goes to reserves, or whether a qualifying reserve study supports a different figure [3]. Lenders also check for pending or recently completed special assessments, deferred maintenance items, and litigation, all of which can affect whether the project is deemed warrantable. For Florida buildings, lenders increasingly ask specifically whether a milestone inspection and SIRS report are complete, current, and what they found, since an overdue or alarming report is now a red flag lenders actively screen for post-Surfside. Boards that keep organized, current documentation, the SIRS report, the milestone inspection report, board meeting minutes showing budget votes, and reserve account statements, make this review faster for buyers trying to close, and slower documentation often means delayed or denied loans for unit sellers. This is one area where a Building-Specific Board Compliance Kit ($199, one-time) helps: it organizes the SIRS report, milestone inspection findings, and reserve documentation into one packet a lender or buyer's agent can review quickly, without the board scrambling to assemble records under deadline pressure.
What's the difference between a milestone inspection and a reserve study?
They answer different questions and neither substitutes for the other. A milestone inspection under 553.899 is a structural safety inspection: a licensed engineer or architect physically examines the building and issues a report on structural integrity, primarily to catch the kind of deterioration that led to the Champlain Towers South collapse . A reserve study, or in Florida specifically the SIRS report, is a financial planning document: it estimates remaining useful life and replacement cost for major components, then builds a funding schedule. In practice the two overlap heavily for Florida condos, since SIRS uses much of the same component inspection data the milestone inspection generates, and many engineering firms perform both engagements together to save the association money and avoid duplicate site visits. But legally they are separate requirements with separate statutory triggers (building age and height for milestone inspections, building height and SIRS threshold for the reserve study), and a board should not assume completing one satisfies the other. If you're unsure which deadline applies to your building, milestone inspections covers the age and coastal-distance triggers in detail, and reserve fund relief options (if your association is struggling to meet new funding requirements) are covered in florida condo reserve fund relief.
What happens if a Florida association doesn't do a required SIRS study or underfunds reserves?
Failing to complete a required SIRS study, or budgeting less than the study requires for the covered structural components, puts the association at legal and financial risk, though the specific consequences depend on your county's enforcement posture and your association's governing documents, so this is not something a general article can resolve for your building. Statutorily, boards lose the ability to waive or reduce reserve funding for SIRS-covered components once the report is due, meaning a board that simply skips the study doesn't get relief from the funding requirement, it just loses visibility into what that funding should be [1]. Beyond the legal exposure, underfunded reserves compound the special assessment problem discussed above: the longer structural work goes unaddressed, the more expensive it typically becomes, and the harder it is to phase repairs gradually rather than all at once. Boards in this position should talk to association counsel promptly rather than waiting, since remediation options (financing, phased assessments, insurance claims where applicable) tend to narrow as deadlines pass. Confirm current deadlines and any legislative changes with your association's counsel and county building department, since the legislature has amended these provisions more than once since 2022 and further changes are plausible.
Frequently asked questions
What is a reserve study?
A reserve study is an engineering and financial analysis of a building's major shared components (roof, structure, plumbing, elevators) that estimates remaining useful life and replacement cost, then builds a funding schedule so the association saves gradually instead of facing surprise bills. Florida's condo-specific version is called a Structural Integrity Reserve Study (SIRS) under Fla. Stat. 718.112(2)(g).
What is a reserve study for HOA?
For homeowners associations (not condos), a reserve study works the same way structurally, but Florida law doesn't currently mandate one for most Chapter 720 HOAs the way SIRS is mandatory for condos. Many HOAs commission one voluntarily anyway, since lenders and insurers increasingly ask for reserve documentation before financing or underwriting a policy.
What is an HOA assessment?
An assessment is a charge the association levies on owners, either a regular recurring assessment funding normal operations and reserves, or a special assessment, a one-time or limited charge to cover an unbudgeted repair, insurance spike, or structural finding from a milestone inspection or SIRS report.
How much should an HOA have in reserves?
There's no universal dollar figure; the right amount is whatever a current reserve study or SIRS report says is needed to fully fund each component's projected replacement cost over its remaining life. Fannie Mae's lending standard sets a 10%-of-assessment-income floor as a minimum screen, not a target for genuine reserve health.
How much does a reserve study cost?
Costs vary by building size and complexity. Basic studies can run in the low thousands of dollars; a full Florida SIRS report for a larger high-rise, requiring a licensed engineer's site visit and component-level analysis, commonly runs into five figures. Get multiple quotes from Florida-licensed engineers before committing.
Are HOA special assessments tax deductible?
Generally no, for a personal residence, similar to regular HOA dues. Assessments funding capital improvements may add to your cost basis, reducing capital gains tax when you sell. For rental properties, repair-related assessments may be deductible in the year paid; capital improvements typically must be depreciated. Confirm with a CPA.
Does Fannie Mae require a reserve study by name?
No. Fannie Mae's Selling Guide (B4-2.3-02) requires associations to budget at least 10% of assessment income for reserves, unless a reserve or component study completed within the past three years justifies a different amount. It's a funding adequacy test, not a mandate to hire a specific type of study.
Does a Florida SIRS report satisfy Fannie Mae's reserve requirement?
Often, but not automatically. A current SIRS report can support funding below the 10% floor for the components it covers, but SIRS doesn't cover every category Fannie Mae's underwriting reviews, so lenders may still check overall budget allocation separately. Ask your lender directly during a warrantability review.
What's the difference between a milestone inspection and a SIRS study?
A milestone inspection under Fla. Stat. 553.899 is a structural safety examination by a licensed engineer or architect. A SIRS report is a financial planning document estimating component life and replacement cost to set reserve funding. They often use overlapping data but are legally separate requirements with separate triggers.
Which Florida buildings need a SIRS report?
Condominium and cooperative buildings three stories or higher generally fall under the SIRS requirement in Fla. Stat. 718.112(2)(g) and 719.106(1)(l). Specific timing and phase-in details have been amended by the legislature since 2022, so confirm your building's exact deadline with association counsel.
Can a board vote to waive reserve funding for SIRS components?
No. Once SIRS applies, Florida law removes the board and membership's ability to vote to waive or reduce reserve funding for the specific structural components the report identifies, a change from pre-2022 law that allowed broader waivers.
What happens if reserves aren't enough to cover a milestone inspection repair?
Boards typically choose between a special assessment, a loan against future assessments, or a combination. The right mix depends on the repair cost, existing reserve balance, and owners' ability to pay, and should be worked out with the board's engineer, accountant, and attorney.
Sources
- Florida Statutes, Ch. 718.112(2)(g): SIRS requirement, structural components covered, and elimination of reserve waivers for those components
- Florida Statutes, Ch. 719.106(1)(l): Parallel SIRS-equivalent requirement for cooperatives
- DBPR, Division of Florida Condominiums, Timeshares, and Mobile Homes: State division overseeing condo association compliance; no state-set fee schedule for reserve/SIRS studies
- IRS, Publication 530, Tax Information for Homeowners: HOA dues and special assessments for a personal residence are generally nondeductible personal expenses
- IRS Publication 527, Residential Rental Property: Rental property repair vs. capital improvement distinction affects deductibility timing of special assessments
- Florida Statutes, Ch. 553.899: Milestone inspection age and coastal-distance triggers (30 years generally, 25 years within three miles of coastline)