What are capital improvements? A guide for your Virginia HOA

What are capital improvements?

Capital improvements are substantial projects that add, upgrade, or significantly improve community property, such as building a new clubhouse feature or replacing an outdated amenity with a major upgrade.
 

Capital improvements vs. capital components

Capital components are existing items the HOA is responsible for repairing, replacing, or restoring over time, while capital improvements are projects that add something new or significantly upgrade what is already there.

Virginia law defines capital components as “items, whether or not a part of the common area, for which the association has the obligation for repair, replacement, or restoration and for which the board of directors determines funding is necessary” (Va. Code § 55.1-1800). Examples might include an HOA-maintained road, pool equipment, or other shared infrastructure.
 

Virginia HOA reserve and capital improvement laws

Virginia’s Property Owners’ Association Act includes several requirements that directly affect planning and funding for major community expenses:

• Reserve studies: Boards must conduct a reserve study at least once every five years to determine the reserves needed to repair, replace, and restore capital components (Va. Code § 55.1-1826(B)(1)). Learn more in our guide to hiring a Virginia reserve study company.
   
• Annual reserve review: The board must review the reserve study at least annually to determine whether reserve funding remains sufficient (Va. Code § 55.1-1826(B)(2)).
   
• Budget adjustments: Boards must make the budget and assessment adjustments they consider appropriate to maintain reserves (Va. Code § 55.1-1826(B)(3)).
   
• Reserve disclosures: When the reserve study shows that reserves are needed, the budget must include information such as estimated replacement costs, remaining useful life, current reserves, expected contributions, and the amount recommended by the study (Va. Code § 55.1-1826(C)).
   
• Funding options: Boards may meet repair and replacement needs through reserve funds, additional assessments, or borrowed funds (Va. Code § 55.1-1826(D)).
   
• Additional assessments: Boards may levy an additional assessment when they find it is in the association’s best interests and the funds are used primarily for common area upkeep or other association responsibilities, including capital component maintenance, repair, and replacement (Va. Code § 55.1-1825(A)).
   
• Association borrowing: Unless the declaration gives greater or lesser authority, boards may borrow for capital component maintenance, replacement, repair, restoration, or recommended reserve funding (Va. Code § 55.1-1825(D)).

Virginia HOA laws and governing documents can change. Boards should work with qualified Virginia counsel when planning a major project or deciding how it will be approved and funded.
 

Typical capital improvements in Virginia

Capital improvements for Virginia HOAs can take many forms depending on the age, size, and priorities of the community.

Examples may include:

• Adding or substantially upgrading a clubhouse
   
• Building a new pool or recreation area
   
• Adding pickleball, tennis, or basketball courts
   
• Creating new walking trails or gathering spaces
   
• Installing new community security or access systems
   
• Adding electric vehicle charging infrastructure
   
• Completing major landscaping or entrance enhancements
   
• Upgrading community lighting
   
• Adding new playground equipment or recreational amenities
   
• Making significant accessibility improvements

Some of these projects may instead qualify as repair or replacement of an existing capital component depending on the scope of the work.
 

How to fund capital improvements

1. Use your reserve funds

   Reserve funds typically have restrictions around what they are used for. Your governing documents should provide clear guidelines on when and where they can be spent. A current reserve study can help the board confirm whether the project was anticipated, how much has been set aside, and whether using those funds could leave the association short for other upcoming repairs.
    

2. Collect a special assessment

   If your reserves are insufficient to pay for what your community or building needs, this may mean levying a special assessment, an additional HOA fee that helps finance the project's cost. While a special assessment allows the community to avoid taking on debt, it is also often unpopular with owners.
   
   Large, unexpected assessments can create hardship for residents, who may challenge the decision if they believe the assessment was not properly adopted or communicated. Before imposing a one-time special assessment on your community, check your governing documents and consult with your legal counsel to support compliance with Virginia association laws.
    

3. Association loans

   An association loan can spread the cost of a major project over several years, which may be more manageable than a large one-time assessment. For communities managed by FirstService Residential, our affiliate company FirstService Financial can help explore financing options and support the application process.

How a reserve study helps plan major projects

A reserve study is a long-term planning tool that looks at the condition of major community assets, estimates when they may need repair or replacement, and projects what that work could cost. For capital improvements for Virginia HOAs, it gives boards a clearer picture of what expenses may be coming and whether current reserve funding is on track. Reviewing the study each year can help boards plan ahead and reduce the risk of unexpected costs.
 

How FirstService Residential can help

For more than 30 years, FirstService Residential has been Virginia’s trusted leader in property management. Our local experts provide customized services that simplify association operations, from collecting monthly assessments to financial management, maintenance, and long-term planning.

We understand the needs of Virginia communities and deliver proven programs that support financial stability and consistent service. Plus, we offer 24/7 customer care and industry-leading training for board members and associates.

Contact FirstService Residential today to learn how our Virginia team can support your community.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.