What does it mean if a condo association's reserves are underfunded?

The honest arithmetic

Every building component has a countdown clock: the roof, the elevators, the paint and waterproofing that protect the concrete. Reserves are simply saving in advance for known future bills. When an association funds reserves at, say, 40 percent of the recommended level, the missing 60 percent has not disappeared. It is waiting, attached to the deed of every unit.

Why the rules changed

Florida associations were long allowed to waive reserve funding by owner vote, and many kept fees low that way for decades. Since the post-Surfside reforms, associations in buildings three stories and taller generally can no longer waive or partially fund reserves for structural items in budgets adopted on or after December 31, 2024. Buildings that deferred are catching up now, which is exactly why some Naples listings look surprisingly cheap while their monthly fees look surprisingly high, or are about to.

How to evaluate it as a buyer

• Get the percent funded figure from the reserve study. Above roughly 70 percent is generally considered strong; below 30 percent deserves hard questions.
• Ask what the plan is. A board with a written catch-up plan is a different risk than a board hoping the problem stays quiet.
• Price the gap into your offer. If a realistic catch-up means $300 more per month or a likely $30,000 assessment, that is a negotiating fact, not a reason to panic.
• Do not assume underfunded means walk away. Sometimes the discounted price more than covers the gap. The sin is not buying into an underfunded building; it is doing so unknowingly.