Governor Gavin Newsom signed AB 2050 on September 29, 2026, setting new requirements for how California homeowners associations plan and save for major repairs. The new reserve-study and funding provisions begin January 1, 2032. For someone buying or owning a San Diego condo, the useful question now is how the association intends to get from its current finances to a plan that pays for the work ahead. Governor’s signing announcement.
Some communities already collect enough to support their repair plans. Others will have a substantial gap to close. That difference will matter when you compare monthly dues, decide how much cash to keep after a purchase or consider the timing of a sale.
My analysis of reserve funding and homeowner affordability was featured in the Daily Mail’s national coverage. Here is how the signed law changes that conversation, and the questions I bring to a purchase or ownership decision.
Which associations does AB 2050 cover?
AB 2050 concerns associations that manage California common interest developments. That includes condominium communities and other developments with association responsibilities for shared property. What the association must maintain matters more than whether the home is marketed as a condo, townhome or detached house.
The new reserve-study provision applies when the current replacement value of the major components the association must repair, replace, restore or maintain is at least half of its gross budget. It calls for a reasonably competent and diligent visual inspection of accessible areas of those components at least every three years, with the study reviewed and updated annually. The study and funding rules are set out in AB 2050’s amendments to Civil Code sections 5550 and 5552.
For a buyer, start by identifying the association’s actual obligations. A community responsible for roofs, exterior walls, paving and utility lines has a different funding problem from one maintaining a small landscaped common area. The governing documents and reserve study should show which responsibilities belong to the association and which belong to individual owners.
What happens in 2027 and 2032?
There are two dates to understand:
| Date | What it means |
|---|---|
| January 1, 2027 | AB 2050 takes effect. The existing reserve-study rules continue to apply until the new ones begin in 2032. |
| January 1, 2032 | The new reserve-study provisions and annual funding requirements become operative. |
An effective date tells you when a law takes effect; a later operative date tells you when specified requirements begin to apply. AB 2050 expressly places its new funding requirements in 2032. Article IV, section 8 of California’s Constitution provides the ordinary effective-date framework; the bill text supplies its later operative dates.
A roof that needs replacement in 2029 still needs a funding plan for 2029. Owners can ask the board now how existing repair obligations, current contributions and the 2032 requirements fit together. Buyers can ask whether the budget they are reviewing already includes an adopted change or whether the board is still weighing its options.
The distinction changes how you budget. An approved increase with a stated start date belongs in your ownership calculation. A possible increase calls for a closer look at the amount under discussion and the reason for it.
How the reserve contribution is calculated
The law ties the annual contribution to the most recent reserve study. The study must identify the minimum reserve contribution needed to keep the projected reserve account balance from falling below zero over the following 30 years. The association must fund at least that study-based minimum each year once the new provisions are operative.
Think of the projection as a schedule of money coming in and repair bills going out. It starts with the reserve balance, adds planned contributions and accounts for the estimated timing and cost of major work. A projected negative balance means the plan runs short at some point along that schedule.
This makes timing particularly important. An association can have a sizable reserve balance today and still face a shortfall if several expensive projects arrive together. Another association may have a smaller balance but more time to collect the money before its largest project.
The percentage-funded figure answers a different question: how the association’s reserves compare with a calculated funding benchmark at a particular date. Under AB 2050, a low percentage alone is not the trigger for the 15% contribution rule. The trigger is projected negative reserve cash within the 30-year period. I want to see both the current financial position and the schedule that shows how the association expects to pay its bills.
What the 15% budget requirement means
When the reserve projection falls below zero at any point over the following 30 years, the law requires the association to transfer at least 15% of its gross annual budget into reserves each year until the projected balance no longer goes negative.
The denominator matters. On a hypothetical $600,000 gross annual budget, 15% is $90,000. If that budget already includes $60,000 in reserve contributions, the difference to that percentage-based minimum is $30,000 at that budget level. The association must also satisfy the study-based contribution requirement, which may call for more. Any revised budget needs to be evaluated using its own figures.
For the homeowner, the additional amount depends on what the association already collects and how it funds the difference. The 15% allocation is not an automatic 15% increase in each owner’s dues.
For a household-level illustration, suppose an association needs an additional $90,000 a year. In household terms: $90,000 ÷ 25 homes ÷ 12 months = $300 more per home per month, assuming equal assessment shares and that the entire additional amount is collected through monthly dues. Actual allocations follow the association’s governing documents and applicable requirements. The useful number is the funding gap for your community, translated into your share and payment schedule.
Special assessments and homeowner voting
AB 2050 provides for a reserve-funding special assessment when the association cannot meet the specified reserve contribution through its gross annual budget. It expressly subjects that assessment to the protections in Civil Code section 5605.
Under the standard rule, special assessments that collectively exceed 5% of the association’s budgeted gross expenses for the fiscal year require approval by a majority of a quorum of members. AB 2050 specifically requires a membership vote when the amount needed exceeds the amount the association can impose without one. Section 5605 also generally requires that approval for a regular-assessment increase exceeding 20% over the preceding fiscal year’s assessment. Separate statutory rules address qualifying emergencies and certain deed-restricted affordable units.
The law also says an association may levy this particular reserve-funding special assessment no more than once every nine years. That restriction applies to the assessment created by the new section 5552. It does not create a nine-year exemption from other lawful special assessments or from regular dues increases.
If you receive an assessment notice, establish its purpose, legal basis, amount, approval status and due dates. For a purchase, also establish how the charge will be handled in the contract. My guide to buying a San Diego condo with a special assessment explains the payment and negotiation questions in more detail.
Funding choices before 2032
The years before the new requirements begin give associations time to compare funding approaches. A board may consider increasing contributions gradually, adopting a larger increase sooner or combining budget changes with a properly approved assessment. The repair schedule and the association’s legal requirements will shape those choices.
Spreading a funding need over more years can make the annual amount easier to absorb. In a simplified example, accumulating an additional $120,000 over five years requires $24,000 a year; waiting until only two years remain requires $60,000 a year. Those figures exclude interest and changes in costs. They also assume the work can safely and properly wait until the stated date.
There is a tradeoff for owners. Earlier contributions mean paying more sooner, while postponing contributions leaves less time to cover the same repair bill. For a buyer or seller, an adopted plan makes those future costs easier to evaluate. A discussion in meeting minutes still needs to be distinguished from an approved charge.
Ask the board what it has decided, which options it considered and when owners will receive updated numbers. An association that plans ahead can give people more time to adjust their household budgets. The actual choices will vary by community.
Comparing two associations: lower dues today, different costs ahead
Consider two entirely hypothetical 40-home associations with equal assessment shares. Assume their homes and included services are otherwise comparable. Both have a roof project ahead, but the starting reserves, repair timing and adopted funding plans differ.
For clarity, this example holds repair costs and all other expenses constant, omits investment income and includes only the roof expenditure shown. It is a five-year comparison, not a complete 30-year reserve study or an example of an actual property.
| Item | Association A | Association B |
|---|---|---|
| Monthly dues in year 1 | $600 per home | $700 per home |
| Starting reserve balance | $120,000 | $240,000 |
| Annual reserve contribution in year 1 | $48,000 | $72,000 |
| Roof expenditure | $360,000 at the end of year 3 | $480,000 at the end of year 5 |
| Adopted dues from year 2 | $750 per month | $700 per month |
| Adopted annual reserve contribution from year 2 | $120,000 | $72,000 |
If Association A kept contributing only $48,000 a year, it would have $264,000 before the roof bill: $120,000 + three years of $48,000. Paying $360,000 would leave a $96,000 shortfall. Its adopted plan instead increases monthly dues by $150 beginning in year 2, all of which goes to reserves in this example. That is a 25% dues increase; assume it has received the required member approval. Across 40 homes, the increase adds $72,000 a year, bringing annual contributions to $120,000.
Under that adopted plan, Association A reaches the end of year 3 with $48,000 after the roof: $120,000 + $48,000 + $120,000 + $120,000 − $360,000. Another two years of contributions bring its illustrated year-5 balance to $288,000.
Association B contributes $72,000 each year. At the end of year 5, it has $120,000 after paying for its roof: $240,000 + five years of $72,000 − $480,000.
Now compare what an owner pays over those five years:
| Five-year dues calculation | Per home |
|---|---|
| Association A: 12 months at $600, then 48 months at $750 | $43,200 |
| Association B: 60 months at $700 | $42,000 |
Association A starts $100 a month lower but costs $1,200 more in dues over the five years under the adopted plans. It also finishes this limited example with a larger reserve balance. Both facts belong in the comparison.
The purchase decision still depends on the buildings, the rest of their repair schedules, what the dues cover and the price of each home. I would use the full projection to see what comes after the roof, then compare the total ownership costs with the buyer’s budget. The listed dues are the starting point; the adopted plan shows more of what you are committing to.
Questions to ask before you commit
Get the latest reserve study and annual budget together with the current cash-flow projection, adopted contribution plan, assessment notices and relevant board minutes. Then ask questions that connect those records to your decision:
- Where does the projection first run short? Identify the year, the project and the estimated amount. A gap tied to near-term work deserves immediate attention in your budget.
- What contribution does the latest study recommend, and what has the association adopted? Establish the difference, any approved increases and their start dates.
- Have repair timing or prices changed? Recent inspections, bids or completed work may explain why the latest budget differs from an older study.
- What assessments have been approved, and what is still being considered? Ask for the notice, vote or board action and payment schedule that establish the current status.
- How much cash would remain after closing and known charges? Compare the monthly payment and reserves you would retain with the work and funding decisions ahead.
- What does the lender need for this project? Send the actual association information to the lender early so financing and ownership costs can be considered together.
For a purchase, I bring those answers back to the property, the offer and the buyer’s alternatives. We may need a clearer answer from management, a different price or an assessment arrangement that works within the contract and financing. Owners considering a sale can use the same information to present the association’s adopted plan accurately and understand how their home compares with competing properties.
My San Diego condo buyer-broker guide explains how I bring the property, association and financing questions together when representing a buyer. AB 2050 makes the funding plan an especially useful part of that conversation, even before 2032.
AB 2050 and condo financing: two different reserve tests
If you are buying, refinancing or preparing to sell, ask which reserve requirements the lender will apply to the transaction. AB 2050 sets California association obligations. Mortgage project review asks whether the condominium project qualifies under the selected loan program. The same budget may need to answer both questions.
| Question | AB 2050 | Fannie Mae Full Review |
|---|---|---|
| When does the relevant funding change begin? | January 1, 2032 | Loan applications dated on or after January 4, 2027 |
| What is the percentage measured against? | Gross annual budget; the 15% minimum applies when the 30-year reserve projection goes negative | Annual budgeted assessment income, applying Fannie Mae’s calculation rules; the minimum rises from 10% to 15% |
| How does the reserve study fit? | It establishes the contribution needed to prevent a negative projected reserve balance over 30 years | An acceptable study can support an alternative to the percentage calculation, subject to the lender’s review and specific funding conditions |
The dates and percentage requirements come from AB 2050, Chapter 796, and Fannie Mae’s lender letter, page 3. The lender should calculate the applicable reserve allocation from the actual budget rather than assume the two denominators are interchangeable.
There is a particularly important difference in the study alternative. Fannie Mae’s Full Review guidance requires the budget to include the study’s highest recommended reserve allocation and imposes additional adequacy conditions. These enhanced study conditions apply to loan applications dated on or after August 3, 2026. A study that uses baseline funding, meaning it lets reserve cash approach zero without going negative, cannot be used in place of the percentage requirement. AB 2050’s nonnegative cash-flow standard therefore does not, by itself, answer the lender’s reserve question.
That is worth resolving before negotiating around an association’s assurance that it is preparing for AB 2050. Have the lender identify the review path, the budget year it needs and any missing evidence. Different programs and eligible review paths have different requirements. My condo mortgage project-approval guide explains the broader review, including insurance and repairs.
What to look for in the next HOA budget
The next annual budget is a practical checkpoint between today’s dues and the association’s longer-term plan. California Civil Code section 5300 requires the annual budget report 30 to 90 days before the end of the association’s fiscal year. For an association whose fiscal year ends December 31, that places the report in the fall. Other associations follow their own fiscal-year calendar.
Read the reserve-funding summary beside the operating budget. My guide to reading an HOA reserve study explains how those records fit together. The report addresses deferred major work, anticipated special assessments and the mechanisms intended to fund reserves. It also discloses specified outstanding association loans. Those details help explain whether a proposed dues increase is building repair reserves, paying an operating expense or supporting an existing borrowing obligation.
Compare these three amounts: the study’s recommendation, the adopted reserve contribution and the transfers shown in recent financial statements. For example, suppose a study recommends $100,000 a year, the budget adopts $80,000, and six months of statements show $30,000 transferred. Those are three different facts. The adopted budget is $20,000 below the recommendation, and a straight-line continuation of the recorded transfers would produce $60,000 for the year.
The next question is whether transfers are scheduled unevenly or have fallen behind. Ask management to explain the timing and the board’s funding decision. This illustration does not establish an assessment or a violation: the applicable requirements, actual transfer schedule and complete records determine the answer. It does show why a contribution printed in a study should be traced into the budget and the account.
If a purchase or sale crosses the next budget’s adoption date, identify who will supply the new report and any assessment notice. Review changes before the relevant contractual deadline with your broker and lender. The HOA due-diligence checklist helps organize the surrounding records.
How the transition can affect a purchase or sale today
For a buyer, separate a payment already approved from a decision still ahead. Put adopted dues and assessment installments into the ownership budget using their actual start dates. Keep an unresolved funding proposal visible as a separate scenario, with the amount and decision date identified. That makes it easier to see whether the purchase works only if the board chooses the least expensive option.
For a seller, collect the explanation behind the numbers before marketing: what changed, what the association adopted and which decisions remain open. A buyer considering two condos can evaluate a documented repair plan more usefully than a general promise that the association will comply by 2032. Keep the funding decision, the repair schedule and the lender’s requested evidence connected.
If an assessment is already approved, use the unit’s written balance and payment terms when discussing the offer. My special-assessment guide covers that negotiation in detail. Here, the AB 2050 question is whether the association’s transition plan is clear enough to evaluate the costs and choices attached to this particular home.
Frequently asked questions
When do AB 2050’s new reserve-funding requirements begin?
The new reserve-study and funding provisions become operative January 1, 2032. The law’s ordinary effective date is January 1, 2027. Associations still need to address repairs and funding obligations that arise before 2032.
Does AB 2050 require every homeowner’s dues to increase by 15%?
No. When the 30-year projection shows a negative reserve balance, the law requires an annual transfer of at least 15% of the association’s gross annual budget to reserves until that projection is corrected. The effect on individual dues depends on existing contributions, the study-based funding requirement and the association’s adopted budget and assessments.
Does a low percentage-funded figure automatically trigger the 15% rule?
The statutory trigger is a projected negative reserve balance at any point over the following 30 years. Percentage funded measures the reserve position against a funding benchmark at a particular date. Read the cash-flow projection and funding plan alongside that percentage.
Can the board impose any amount it wants under the new law?
The reserve-funding assessment is subject to Civil Code section 5605. AB 2050 requires a membership vote when the amount needed exceeds the amount that can be assessed without a vote. The applicable process depends on the type and amount of the assessment and any specific statutory exception.
Does the nine-year rule cover every special assessment?
It applies to the reserve-funding special assessment created by new Civil Code section 5552. Other lawful special assessments and regular dues increases remain governed by their applicable rules.
What should I ask for if I am buying a condo before 2032?
Ask for the latest reserve study, annual budget, cash-flow projection, adopted contribution plan, assessment notices and relevant minutes. Identify the near-term repairs, any projected funding gap and approved changes to what owners will pay. Use those figures to compare properties and decide how much cash you need after closing.
Does meeting AB 2050’s reserve rules mean my condo qualifies for a mortgage?
No. The lender must apply the selected loan program’s project requirements. AB 2050 and Fannie Mae Full Review use different reserve tests and timelines. Ask which review path applies and whether the association’s budget and reserve study satisfy it.
What should I compare when the next HOA budget arrives?
Compare the reserve study’s recommendation, the adopted reserve contribution and recent actual transfers. Identify any approved dues or assessment changes and their start dates. Ask management to explain differences before using the figures in your purchase or sale plan.
Primary sources
- Governor’s September 29, 2026 signing announcement
- Governor’s AB 2050 signing message
- AB 2050 official text and reserve provisions
- AB 2050 — Chapter 796, Statutes of 2026 (Secretary of State chapter index)
- Civil Code section 5605: assessment limits and member approval
- Civil Code section 5610: emergency assessment provisions
- Fannie Mae LL-2026-03: reserve requirements and application dates
- Fannie Mae Full Review: budget and reserve-study requirements
- Civil Code section 5300: annual budget disclosures