Texas Reserve Study Laws vs. a Board's Fiduciary Duty

Updated October 2026. This guide reflects the Texas Property Code as amended by the 89th Legislature (2025), including SB 711 and SB 2629, both effective September 1, 2025, and Fannie Mae's 2026 condo reserve changes. Texas still has no statute requiring a reserve study or a minimum reserve balance. This is a plain-language summary, not legal advice. Confirm your association's obligations with Texas counsel.

The legal situation in Texas is nuanced: Texas state law does not explicitly require most condo associations or HOAs to conduct formal reserve studies or maintain a minimum reserve fund balance. However, the laws governing condominiums (Texas Uniform Condominium Act, Property Code Chapter 82) explicitly grant the association the power to "adopt and amend budgets for revenues, expenditures, and reserves" (Section 82.102). Similarly, planned communities governed by Chapter 209 typically have this power outlined in their governing documents.

Crucially, Texas law does impose mandatory disclosure requirements regarding reserves during property resale. Both Chapter 207 (for subdivision HOAs, Section 207.003) and Chapter 82 (for condos, Section 82.157) require associations to provide a Resale Certificate upon request. This legally mandated certificate must include information about the association's financial health, specifically including "the amount of reserves, if any, for capital expenditures and of portions of those reserves designated by the association for a specified project" (Section 82.157 for condos). Since September 1, 2025, a condo association may charge a reasonable and necessary fee of no more than $375 for a resale certificate (Section 82.157(f), added by SB 711), matching the cap subdivision HOAs already had under Section 207.003.

This disclosure requirement, combined with the board's fundamental fiduciary duty, creates a strong practical and legal incentive for reserve planning, even without a direct state mandate to conduct a study.

What is a Texas HOA board's fiduciary duty? This legal standard requires board members to act in "good faith," with loyalty (prioritizing the association's interests), and with the care an "ordinarily prudent person" would exercise in similar circumstances (the duty of care). This includes making informed decisions and exercising prudent financial management regarding the association's assets.

This creates a paradox: while the state doesn't mandate the study, it mandates disclosure of reserves, and general fiduciary duty demands prudent planning. If a major component fails (like a roof or foundation) requiring a large special assessment because the board didn't plan, homeowners can sue the board for breaching its fiduciary duty. The board's defense relies on proving its actions were "prudent."

A professional reserve study provides that proof for a Texas board. It demonstrates the board fulfilled its Duty of Care by making informed decisions based on expert analysis, ensuring compliance with disclosure requirements, and protecting the association from negligence claims.

What's Changed in Texas HOA and Condo Law (2025–2026)

The 2025 legislative session did not add a reserve study requirement or a minimum reserve balance for Texas HOAs or condominiums. It did pass several laws that change how associations disclose fees, publish documents, collect assessments, and hold votes. All took effect September 1, 2025.

Law	What changed	Why it matters for reserves
SB 711: condo resale certificate fee (Prop. Code § 82.157(f))	A condo association may charge no more than $375 to furnish a resale certificate. Before, condo fees had no statutory cap.	The certificate must still disclose reserve balances and reserves set aside for specific projects. Buyers and lenders read these numbers.
SB 711: condo management certificate (§ 82.116)	The certificate must now list the management company's contact details, the association's website, and the amount and description of any fees charged to sellers or buyers on a transfer. It must be amended within 30 days of a change and e-filed with the Texas Real Estate Commission within 7 days of recording. Certificates recorded before September 1, 2025 had to be filed with TREC by March 1, 2026.	While a required certificate is not recorded or filed, owners are not liable for attorney's fees or interest on delinquent assessments. Lapses weaken the collections that fund reserves.
SB 711: condo websites (§ 82.1142)	Condo associations with 60 or more units, or managed by a management company, must post their current recorded dedicatory instruments on a website members can access.	Many boards use the same site to share budgets and reserve study summaries with owners.
SB 2629: meetings and voting (§§ 82.108, 82.110, 209.0056, 209.00592)	Condo association and HOA owner meetings may be held electronically or by phone. Condo boards may act by unanimous written consent and condo votes may be cast electronically. Subdivision HOAs may meet their voting-method requirement with an electronic ballot, in addition to absentee ballot or proxy.	Where governing documents require an owner vote to raise assessments or approve a special assessment, it is now easier to reach a quorum and adopt a funding plan.

What has not changed: Section 82.102 still gives condo boards the power to adopt budgets that include reserves, and Sections 82.157 and 207.003 still require resale certificates to disclose reserves. Texas has no statutory reserve funding percentage, study schedule, or structural inspection mandate like those in Florida, California, or New Jersey.

What to watch: The Texas Legislature meets next in regular session in January 2027, and bill prefiling opens in November 2026. Reserve legislation in other states, and Fannie Mae's 15% reserve minimum (below), make reserve rules a likely topic. SmartProperty will update this guide if a Texas reserve bill is filed.

What are the Benefits of a Reserve Study? The 4 Key Pillars for Texas Communities

Even without a state mandate, proactively commissioning a reserve study provides crucial benefits for Texas communities.

Benefit 1: Avoid Special Assessments and Ensure Financial Stability

A reserve study shifts financial planning from reactive (special assessments) to proactive. It helps avoid sudden, large bills for homeowners when predictable failures occur. The "special assessment" model is also unfair—long-term owners might enjoy years of artificially low dues, only for new owners to face a massive bill for deterioration that occurred before they arrived. A reserve study creates an equitable plan where owners contribute fairly over time.

Benefit 2: Protect and Increase HOA Property Values in Texas

A reserve study acts as a "maintenance planning tool". By ensuring funds are available, the association can perform repairs and replacements on schedule, preventing "deferred maintenance" that leads to disrepair and lowers property values. Well-maintained common areas directly correlate with higher property values in Texas. Poor reserves can significantly decrease property values.

Benefit 3: Meet Lender Requirements (Fannie Mae & FHA)

A home's value is tied to a buyer's ability to get a mortgage. Lenders like Fannie Mae and FHA have requirements regarding an association's financial health. Fannie Mae requires lenders to review reserve adequacy, and FHA often requires 10% of income be allocated to reserves. Since Texas law requires disclosing reserve amounts via the Resale Certificate, lenders will see this information. An association showing low or non-existent reserves can be placed on a lender's "ineligible" list, hurting marketability and property values.

Fannie Mae's New 15% Reserve Rule (Lender Letter LL-2026-03)

This is a federal lending rule, not a Texas law, but it decides whether buyers of condominium units in Texas can get conventional financing. Fannie Mae issued Lender Letter LL-2026-03 on March 18, 2026, and Freddie Mac made matching changes.

15% reserve minimum. For loan applications dated on or after January 4, 2027, the association's budget must allocate at least 15% of assessment income to replacement reserves, up from the long-standing 10%.
A stricter reserve study alternative. An association below the minimum can still qualify with a reserve study completed or updated within the past three years, but only if its budget funds the study's highest recommended contribution. Baseline funding is no longer accepted.
Full project reviews. For loan applications dated on or after August 3, 2026, lenders can no longer use the streamlined Limited Review, so most condo loans now get a full review of the budget and reserves.

Boards that want owners to keep access to conventional financing should plan to budget at least 15% of assessment income for reserves, or fund the highest plan in a current reserve study. Read more: New Fannie Mae & Freddie Mac Rules Are Coming. Is Your Community Ready?

Benefit 4: Provide an Objective Roadmap for Future Texas Boards

A reserve study is an essential governance tool. Board members and managers change, but the study provides continuity and explains the reasoning behind financial decisions. It's an "unbiased and objective" roadmap that depoliticizes budget discussions.⁶ The board isn't the "bad guy" for funding reserves; it's fulfilling its fiduciary duty based on an expert plan.

What is a Reserve Study? The Two Essential Parts

A professional reserve study is a long-term capital planning tool consisting of two parts: a physical analysis and a financial analysis.

Part 1: The Physical Analysis (What We Inspect)

A specialist conducts a visual, non-invasive inspection to assess the physical status of common property. This includes:

Component Inventory: A list of major common area components the HOA must repair/replace. Components typically meet a four-part test: association responsibility, limited useful life, predictable remaining life, and material cost.
Condition Assessment: Evaluating the current condition of each component.
Life & Valuation Estimates: Assigning Useful Life (UL), Remaining Useful Life (RUL), and estimating current Replacement Cost, including all related costs.

Part 2: The Financial Analysis (The Funding Plan)

This translates physical data into a financial roadmap. It includes:

Fund Status: A snapshot of reserve health, often using "Percent Funded".
Funding Plan: The core recommendation—a multi-year plan (typically 20-30 years) projecting income/expenses and suggesting a stable contribution amount.

How to Read a Reserve Study: 2 Key Metrics Explained

For a Texas board, focus on these key metrics:

Metric 1: What is "Percent Funded" in a Reserve Study?

"Percent Funded" measures reserve strength.¹⁷ It is calculated as:

$$\text{Percent Funded} = \frac{\text{Reserve Fund Balance (actual cash on hand)}}{\text{Fully Funded Balance (computed deterioration)}}$$

This formula compares your actual cash reserves to the calculated value of the wear-and-tear (deterioration) on your assets.²³ "100% Funded" means the reserves match the computed deterioration, not the total replacement cost of everything today. An industry rule of thumb suggests maintaining at least 70% funded to minimize the risk of special assessments.

Risk Profile :

Strong (> 70% Funded): Low risk of special assessments.
Fair (30% - 70% Funded): Moderate risk.
Weak (< 30% Funded): High risk.

Metric 2: Choosing a Funding Goal (Full, Threshold, or Baseline)

The study presents funding goals, defining acceptable risk levels.

Baseline Funding: Keeps balance just above $0. High risk, rarely recommended.
Full Funding: Aims for ~100% funded. Low risk, most conservative.
Threshold Funding: Keeps balance above a set minimum (e.g., 70%). Balanced, commonly recommended.

How to Implement a Reserve Study: A 5-Step Guide for Texas Boards

For a Texas board implementing its first study, the process involves these steps:

Step 1: Understand the 3 Levels of a Reserve Study

Know what to ask for. National standards define three levels:

Level I (Full Study): The essential first study. Involves full on-site inspection and inventory creation.
Level II (Update with Site Visit): Periodic update (every 3-5 years recommended), specialist verifies inventory and re-assesses conditions on-site.
Level III (Update, No Site Visit): Financial-only update for off-years.

Step 2: Pass a Board Resolution and Prepare Documents

Formally resolve to commission the study. Gather essential documents: Governing Documents (defining maintenance responsibilities), budgets, and repair records.

Step 3: How to Hire a Credentialed Reserve Specialist

This is critical. Perform due diligence. Look for:

Credentials: RS (Reserve Specialist) from CAI or PRA (Professional Reserve Analyst) from APRA. These require experience and adherence to standards.
Standards: Adherence to CAI National Reserve Study Standards.
Insurance: Proof of professional liability (Errors & Omissions) insurance.

Step 4: The Kick-Off Meeting and On-Site Inspection

Schedule a kickoff meeting and on-site inspection. Ensure someone knowledgeable accompanies the specialist. This is the "Physical Analysis".

Step 5: Review the Draft Report and Adopt the Funding Plan

Review the draft for factual errors. Formally vote to adopt the study and, most importantly, implement its funding plan into the next annual budget. This action documents the board's fulfillment of its fiduciary duty.

Conclusion: Why a Reserve Study is a Critical Investment for Your Texas Community

For a Texas HOA or condo board, commissioning a reserve study is not just a best practice; it's a vital tool for fulfilling fiduciary duties, ensuring compliance with state disclosure laws, and protecting the community's financial health.

In Texas, the reserve study is the mechanism that:

Fulfills the board's "prudent person" Duty of Care.
Protects homeowners from unfair and potentially challengeable special assessments.
Preserves and enhances property values
Helps meet lender requirements and facilitates sales through accurate Resale Certificate disclosures.
Provides objective justification for budget decisions.

A Texas board that proactively commissions a reserve study demonstrates responsible management, meets its legal obligations effectively, and secures the community's financial future.

Texas Reserve Law FAQ

Does Texas require HOAs or condos to have a reserve study in 2026?

No. As of October 2026, no Texas statute requires a reserve study or a minimum reserve balance for HOAs or condominiums. Your governing documents, your lenders, and the board's fiduciary duty may still call for one.

How much can a Texas association charge for a resale certificate?

Up to $375 for a condominium association (Section 82.157(f), since September 1, 2025) and up to $375 for a subdivision HOA under Section 207.003, which also caps the fee for an updated certificate.

Do Texas resale certificates have to show reserves?

Yes. Both condo and subdivision HOA resale certificates must state the amount of reserves for capital expenditures and any reserves the association has set aside for a specific project.

Does Fannie Mae's 15% reserve rule apply in Texas?

Yes, for condominium projects. For loan applications dated on or after January 4, 2027, the association's budget must allocate at least 15% of assessment income to reserves, or fund the highest recommended contribution in a reserve study completed or updated within three years.