Condo reserve requirements to know in 2025/2026

What are condo reserves?

Condo reserves are funds set aside by a condominium association to pay for major repairs and replacements of shared property over time. Unlike the regular operating budget, which covers ongoing expenses like utilities, landscaping, and cleaning, reserve funds are designed for big-ticket projects like a roof replacement, repaving, elevator modernization, or boiler upgrades.

This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
 

Condo reserve requirements

Under Massachusetts condo reserve requirements, every condominium must maintain an adequate replacement reserve fund separate from its day-to-day operating funds. “Adequate” isn’t defined by a specific dollar amount in the statute. Instead, it depends on the unique needs of the property, the age of its components, and the estimated costs of future replacements.

These funds must be:

• Held in a separate account from operating funds.
   
• Funded through common expenses, meaning owners contribute as part of their regular monthly condo fees.
   
• Used only for capital repairs and replacements, not for everyday maintenance or administrative costs.

Massachusetts law also requires that the managing agent or property management company provide a written financial report to the trustees or board at least quarterly. This report should detail receipts, disbursements, and account balances for both the operating and reserve funds.

While the law doesn’t define exactly how much money a condo must keep in its reserves, a widely accepted benchmark for many loan program/project reviews is that at least 10% of the annual operating budget should go toward reserves. A current reserve study may support a different amount depending on the reviewer.

In practice, many communities contribute significantly more than this benchmark, depending on the age and complexity of their property. For instance, a 30-year-old high-rise with elevators, boilers, and a parking structure may require larger annual reserve contributions than a newly built garden-style complex with limited shared systems.

Boards should view reserve funding as a proactive tool rather than a burden. Incremental, consistent contributions reduce the risk of special assessments and help maintain stability in monthly fees. To better understand how your association’s rules and bylaws affect reserve planning, see our guide to condo rules and regulations in Massachusetts.
 

Reserve studies

Although Massachusetts law does not mandate professional reserve studies, obtaining one is considered best practice. A reserve study evaluates all common elements — roofs, mechanical systems, paving, siding, and other components — to estimate when each will need replacement and how much those projects will cost.

A reserve study typically includes three parts:

1. A physical analysis that lists and measures all major components.
    
2. A financial analysis showing how much money should be saved annually.
    
3. A funding plan that guides the board on maintaining the right contribution levels over time.

Even though it’s not legally required, a reserve study provides a clear, data-driven picture of your association’s financial readiness. It helps boards create condo budgets and avoid surprise expenses while maintaining compliance with lender expectations. Many banks and FHA-backed lenders now require that a condominium dedicate at least 10% of its annual budget to reserves or submit a current reserve study as part of loan qualification.

For older properties, it’s generally recommended that a reserve study be conducted every 3–5 years.
 

How much should be in your reserve fund?

There’s no single answer to how much a condominium in Massachusetts should have in its reserve fund, but there are reliable ways to estimate what’s “adequate.” A common guideline is set aside at least 10% of the annual operating budget for reserves. However, that figure is only a starting point. Associations with aging infrastructure, complex amenities, or limited past funding may need to allocate more.

Boards should review:

• Property age and size: Older buildings generally need higher contributions.
   
• Amenities: Pools, elevators, and parking garages can require significant long-term maintenance services.
   
• Recent capital projects: If major replacements have recently been completed, funding levels may temporarily decrease before ramping back up.
   
• Inflation and construction costs: Rising material and labor prices mean replacement costs increase faster than many budgets anticipate.

Boards that revisit funding annually — rather than waiting until a major expense appears — often avoid financial strain. Reviewing inflation trends, insurance deductibles, and market labor rates each year can reveal when contribution levels need small adjustments. Even modest increases made early can prevent large assessments later.
 

Determine maintenance vs. reserve components

Properly categorizing your community’s common area components is one of the challenges that comes with managing reserves. Some items will require regular maintenance, such as pressure washing sidewalks and cleaning windows; others will need replacement, such as roofs and mechanical equipment; and still others will require both, such as pools and carpeting.

For your community components to last until they are due to be replaced, you must budget for maintenance costs every year. If you don’t, you may end up having to replace them before the reserve study’s replacement due date and impose a special assessment or take out a loan.

At the same time, you must make a reserve contribution each year to be properly prepared for covering replacement costs when they are scheduled to occur.

Deciding whether items are maintenance vs. replacement (or both) will ultimately determine if they will be listed in your annual operating budget or as part of your reserve inventory. Usually, less expensive items are included in the operating budget, and costlier items are assigned as reserve components so their replacement costs can be financed over a longer period. If you need help determining whether an item should be included in your operating budget or reserve inventory, consult with your auditor or property management company.
 

How FirstService Residential can help

At FirstService Residential, we work with condominium associations across Massachusetts to help them meet and maintain compliance with state condo reserve requirements. Our goal is to help boards make informed, practical decisions that protect property values and keep communities financially strong. We combine local market expertise with national resources to streamline financial planning, vendor management, and compliance with Massachusetts law.

Contact FirstService Residential today to learn more about how we can help your board meet Massachusetts condo reserve requirements and strengthen your community’s long-term financial stability.