Quick Answer
MCL 559.205 is one sentence long: "A reserve fund for major repairs and replacement of common elements shall be maintained by the associations of co-owners. The administrator may by rule establish minimum standards for reserve funds." The statute sets no dollar amount, no percentage, no study requirement and no separate-account rule. Any minimum standard would have to come from an administrator's rule or from the association's own recorded documents.
A 2026 bill, House Bill 5784, would amend this section to address reserve studies and funding plans. As of our November 13, 2026 reading it had not advanced past committee.
At a Glance
| Item | Detail |
|---|---|
| Law/citation | MCL 559.205 (Condominium Act, 1978 PA 59, section 105), "Reserve fund" |
| Effective date | July 1, 1978 (no later amendments shown in the section history) |
| Applies to | Associations of co-owners of condominiums |
| Key sections | The single section, two sentences |
| Remedy or penalty | None stated in the section |
What the Law Says
Section 559.205 has two sentences, and each does one thing.
- Mandate: a reserve fund "for major repairs and replacement of common elements shall be maintained by the associations of co-owners."
- Delegation: "The administrator may by rule establish minimum standards for reserve funds."
The section's history note shows only "1978, Act 59, Eff. July 1, 1978." We saw no amendment to the text.
What the section does not say
- It does not say how much to reserve or what percentage of the budget.
- It does not require a reserve study or a funding plan.
- It does not require the reserve to be held in a separate account.
- It does not say who is liable if the fund is underfunded, and it states no penalty.
- It does not say the annual budget must be distributed to owners. The annual distribution duty in the Act is the financial statement under MCL 559.154(5); see mandatory bylaw provisions.
Some articles describe a separate-account rule or a statutory reserve percentage as if they were in this section. They are not in the text we read. If your bylaws or an administrative rule contain such a standard, treat it as that source's requirement, and confirm the current rule text with counsel. We did not verify any administrative rule for this page.
What This Means in Practice
For boards
The statute tells boards to maintain a reserve fund. How much, and how it is held, is for the documents and for any standard the administrator adopts. Read your bylaws for a reserve provision and for any minimum contribution language. Budget decisions are the board's, but they are made with fiduciary duties in mind; see director duties and budget season.
Because "maintained" is the only verb, our reading is that an association with no reserve fund at all has a problem under the statute, while an association with a modest one is judged against its documents and any applicable rule. Whether a court would treat an underfunded reserve as a violation is an open question for counsel.
For owners and buyers
A reserve fund is a financial safeguard, not a guarantee. The statute does not promise that a reserve covers a given repair. Buyers and owners reviewing an association's finances can ask for the annual financial statement and any reserve study the association has commissioned. Our existing overview is at Michigan HOA reserve fund requirements, which discusses reserves more broadly.
Pending bill: HB 5784
House Bill 5784 of 2026 is described on the legislature's site as "Housing: condominium; requirements for an association of co-owners to conduct a reserve study and establish a reserve funding plan; modify. Amends sec. 105 of 1978 PA 59 (MCL 559.205)." Its history shows introduction by Representative John Fitzgerald on April 14, 2026, a first reading and referral to the Committee on Regulatory Reform the same day, with a final entry on April 15, 2026 recording electronic reproduction. We did not read the bill text for this page, so we do not describe its contents beyond the title. It is not law. For the bill discussion, see our HB 5784 page, and confirm the current status on the legislature's site before relying on this.
Timeline
| Date | Event |
|---|---|
| July 1, 1978 | Section 105 (MCL 559.205) takes effect with the Condominium Act |
| April 14, 2026 | HB 5784 introduced, read a first time, referred to Regulatory Reform |
| April 15, 2026 | HB 5784 recorded as electronically reproduced; last action shown when we read the page on November 13, 2026 |
Related Michigan Law
- Michigan HOA reserve fund requirements explained
- Michigan condo reserve study bill (HB 5784)
- Mandatory bylaw provisions and annual financial statement (MCL 559.154)
- Books, records and annual audit (MCL 559.157)
- Budget season for Michigan boards
Board Checklist
- Confirm the association maintains a reserve fund for major repairs and replacement of common elements.
- Read the bylaws and master deed for reserve language, including any minimum contribution or account rule.
- Ask counsel whether an administrator rule applies to your association and what it says.
- Keep reserve balances visible in the annual financial statement to owners.
- Consider a professional reserve study even though the statute does not require one.
- Track HB 5784 and update plans if it advances.
- Record reserve decisions and reasons in board minutes.
Frequently Asked Questions
Does Michigan require condo associations to have a reserve fund?
Yes. MCL 559.205 says a reserve fund for major repairs and replacement of common elements "shall be maintained" by the association.
How much must the reserve be?
The statute does not say. It lets the administrator set minimum standards by rule, and your documents may also set one. Confirm both with counsel.
Must reserves be in a separate account?
The statute does not say so. Check your bylaws and ask counsel whether any rule applies.
Is a reserve study required?
Not under the current section. House Bill 5784 proposes changes about reserve studies and funding plans, but it is not law.
What is the status of HB 5784?
On the legislature's page, it was introduced April 14, 2026 and referred to the Committee on Regulatory Reform, with the last entry April 15, 2026. Check the page for updates.
Is there a penalty for not funding reserves?
The section states none. Consequences, if any, would come from the documents, fiduciary duties or other law.
Where This Comes From
This page is based on the text of MCL 559.205 as published by the Michigan Legislature, current through PA 114 of 2026 when read on November 13, 2026, and the legislature's bill page for 2026 HB 5784 (title, sponsors and history only). Official page: legislature.mi.gov, MCL 559.205.
<h2>Where We Stand</h2><p><strong>Our position: we support a statutory reserve study and funding standard.</strong> Michigan's reserve provision sets no funding minimum, and in our experience underfunded reserves are the most common cause of surprise special assessments. Until the law changes, we recommend boards commission a reserve study and fund it on a written plan. This is Association Property Managers' operating view as a management company, separate from the legal summary above, and it is not legal advice.</p>
How APM Helps
Association Property Managers manages condominium and HOA communities across Michigan from our East Lansing office, with flat, published pricing. See our Michigan service area, browse every Michigan state-law guide, or request a free proposal. Laws and documents differ by community, and we review your master deed and bylaws when we build your proposal.
Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed Michigan attorney before acting.
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