HB 5784 Overview (Michigan, 2025-2026 Session)
Purpose and intent
- The bill amends Section 105 of the Michigan Condominium Act (1978 PA 59) to require associations of co-owners to conduct initial reserve studies and to establish a reserve funding plan, with specific timelines, eligibility for professionals, and annual disclosure to owners.
- The goal is to ensure that condominium associations identify and fund anticipated major repairs and replacements for common elements, improving long-term financial planning and transparency.
Key provisions and changes
1) Initial reserve study requirements
- New associations (condominium projects established on or after the effective date of the amendatory act):
- Must conduct an initial reserve study no later than 30 days before the transitional control date.
- The developer must require the association to conduct the reserve study.
- Existing associations (projects established before the effective date):
- Must conduct an initial reserve study no later than 3 years after the act’s effective date if they have not previously conducted a reserve study or last updated one within 5 years before the act’s effective date.
- Alternatively, within 3 years after the effective date, they can contract with a qualified individual to prepare the reserve study and complete it within 1 year of contract execution.
2) Ongoing reserve study updates
- After the initial study, associations must conduct a follow-up reserve study or update at least every 5 years.
3) Applicability criteria
- Subsections (1) and (2) apply to associations that:
- Are responsible for maintaining, repairing, and replacing common elements, and
- Meet either of the following financial/size thresholds:
- Have an annual budget exceeding $20,000, or
- Operate a project with more than 20 condominium units.
4) Qualifications for reserve study preparers
- A reserve study must be prepared by an individual who meets at least one criterion:
- Has participated in at least 30 reserve studies in the past 3 years while employed by a reserve-study firm.
- Has prepared at least 30 reserve studies in the past 3 years.
- Holds a current professional license (architect or engineer) in Michigan.
- Is designated as a reserve specialist by the Community Association Institute or as a professional reserve analyst by the Association of Professional Reserve Analysts.
5) Accessibility of documents
- Reserve studies and updates, along with the required written notice, must be available for inspection and copying by unit owners, prospective buyers, and mortgagees.
6) Reserve funding plan and budgeting
- Upon completion or update of a reserve study, the board must establish a reserve funding plan in line with the study and communicate any changes in writing to the association.
- The board must review the reserve study when preparing each year’s proposed budget.
7) Reserve fund requirements and non-commingling
- A reserve fund for major repairs and replacements must be maintained separately from the operating fund.
- The administrator may set minimum standards for reserve funds (by rule).
- The annual budget must be sufficient to fund the reserve plan, including past and future contributions, to cover ordinary wear-and-tear repairs and replacements mandated by the condominium documents.
8) Annual budget disclosures
- Boards must send a written annual budget notice detailing the current reserve fund balance.
- The notice must include a bolded, required statement explaining potential funding needs through increases, special assessments, or borrowing if reserves are insufficient for major repairs.
9) Administrative rules
- The administrator may promulgate rules under Michigan’s Administrative Procedures Act to establish minimum reserve-fund standards, so long as they do not conflict with the statute.
10) Definitions
- “Reserve study” is defined to identify all components the association is responsible for, provide lifespans and remaining lifespans, estimate current replacement costs, and estimate the annual reserve amount needed for future repairs/replacements.
Effective date and process
- The bill’s effective date is tied to the amendatory act adding the new subsection. It includes transitional provisions for new and existing projects and sets timelines ranging from 30 days to several years after enactment for initial studies, with ongoing updates every 5 years.
Potential impact
- Increases financial transparency and long-term planning for condos in Michigan.
- Expands the oversight and professional requirements for reserve studies to ensure quality and reliability.
- Requires more frequent disclosure to owners about reserve fund status and budgeting implications.
- Creates clear timelines for new and existing associations to establish and maintain reserve plans.
Note: The bill text indicates sponsors and committee referral to Regulatory Reform, with multiple co-sponsors. The summary above reflects the substantive provisions as written in the bill text.
