HOA Reserve Fund Compliance in Michigan: What Volunteer Boards Need to Know

Michigan’s condominium law (MCL 559.101 et seq.) places real obligations on volunteer boards. MCL 559.157 requires associations to hold reserve funds in a separate, dedicated account and restrict their use to capital expenditures and deferred maintenance. Boards that treat reserves as a buffer for operating overruns expose themselves to personal liability under the fiduciary duty standard in MCL 559.152. Michigan courts do not give volunteer boards a pass because they were unpaid — the duty of care applies regardless.

The Detroit metro area alone has thousands of condominium associations, many with aging common elements: parking structures, elevators, roofs, and HVAC systems representing substantial capital expenditures. Grand Rapids and Lansing are adding new associations through suburban development, but new construction does not eliminate the reserve obligation. Reserves must be funded from day one. Boards that inherit underfunded reserves from a developer transition face a difficult situation, and commissioning a reserve study early is the most important corrective step they can take.

BoardStack was built for volunteer treasurers managing real statutory obligations without a staff accountant or dedicated compliance officer. The platform separates operating and reserve accounts at the software level, making commingling structurally difficult, and tracks reserve fund balances alongside the capital items that depend on them. Michigan boards use it to document their reserve funding rationale — the foundation of any good-faith fiduciary defense.