Michigan Condominium Act reserves

What does the rule actually require?

The detail is in the state's administrative rules for condominiums, in the part that sets what a master deed's bylaws must contain; MCL 559.205 (section 105 of the Condominium Act) also addresses the reserve fund. R 559.511 requires the bylaws to provide for a reserve fund for major repairs and replacement of common elements. In summary:

• The fund is for common elements that must be repaired or replaced from time to time, not for routine upkeep.
• It is financed through regular payments by co-owners, rather than by special assessments.
• At a minimum it equals 10 percent of the association's current annual budget, on a noncumulative basis.
• The rule itself says the minimum may prove inadequate for a particular project, and that the association should look carefully at whether a greater amount is needed.

The Community Associations Institute's June 2026 summary of state laws lists Michigan as a state that requires reserves but not a reserve study, and cites the rule together with MCL 559.205 of the Condominium Act. How MCL 559.205 and the rule apply to your bylaws is a question for the association's attorney.

What does "noncumulative" mean for our budget?

Read plainly, it means the 10 percent is measured against the current year's budget and does not stack from year to year. Michigan condo attorneys do not all describe it the same way: some treat it as a minimum yearly contribution, others as a minimum fund balance. Our practical advice is to budget at least 10 percent of the annual budget into reserves every year, keep the reserve money in its own account, and ask your attorney which reading your bylaws follow.

Who does it apply to?

Condominium projects created under the Condominium Act, 1978 PA 59. That includes site condominiums, where each co-owner has a detached house on its own site and the association owns the road, entrance and other shared land. Homeowner associations for platted subdivisions are usually formed under other law; we know of no equivalent reserve rule for them, so check with the association's attorney.

What does the rule leave out?

Almost everything a lender, buyer or new board member asks about:

• No study. Nothing requires a reserve study or says how the 10 percent was arrived at.
• No interval. There is no schedule for reviewing whether the fund is enough.
• No preparer standard. The rule does not say who may assess the property or the funding plan.
• No disclosure format. It does not say how the reserve position is shown to buyers.

Those gaps are why many Michigan boards commission a study anyway: it turns the floor into a figure the board can defend at the annual meeting.

How does a study fit alongside the rule?

CAI's reserve study standards describe a study in two parts: a physical analysis (what the association owns, its condition, remaining life and replacement cost) and a financial analysis (the fund balance today and the contributions needed to cover what comes due). That second part is the analysis the Michigan rule asks the association to do. If it shows the association needs more than 10 percent, the study is the record of why.

CAI also sorts studies into three levels: the first full study on site, later updates where the provider walks the property again, and desk updates done from paperwork. Many Michigan boards start with the full study, bring the provider back on site every third year, and order desk refreshes in the other years. Michigan sets no rhythm, so pick one and write it into the board's annual calendar.

Why do lenders care?

Buyers who use conventional mortgages often trigger a condo project review. Fannie Mae's Selling Guide applies its own reserve test in those reviews, built around a 10 percent budget allocation, and in some cases accepts a reserve study instead. The lender will say which test applies; a current study makes either easier to pass.

What should a Michigan board do this year?

1. Check that this year's budget puts at least 10 percent into reserves. Use the calculator on our home page if it helps.
2. Find the master deed and bylaws, and confirm what the bylaws say about the reserve fund. Many repeat the rule's wording; some ask for more.
3. List the big items coming in the next ten years: roofs, paving, decks, siding, any seawall. If the list is long, 10 percent is probably not enough.
4. Get proposals for a study, ideally before the budget for next year is drafted. See what a Michigan study costs.