HOA Budgets, Reserves and Insurance: A Texas Board’s Guide

Start your Texas HOA budget about three to four months before the fiscal year, working backward from the meeting where the board adopts it. Get the insurance renewal and a reserve-study update first. Price each line from real costs, choose a reserve contribution you can explain, adopt the budget at an open meeting and show owners the math.

Updated October 2026 for the 2027 budget season. Texas law as of October 2026. The Legislature meets in odd-numbered years and changes these rules; check with your association’s attorney.

Build a budget-season calendar

Start about three to four months before your fiscal year begins, then work backward from the adoption meeting. Give the board time to review insurance, capital projects and the costs behind each assessment dollar.

Steps that cite Chapter 209 apply to Texas HOA subdivisions, not condominiums (Texas Property Code §209.003(d)). Condo boards should follow their declaration and the condo section below.

Set dates for the nine steps below, with one director or manager responsible for each request. An insurance renewal or major project may call for an earlier start.

1. Review this year’s results. Compare budgeted income and expenses with actual results. Identify one-time repairs, continuing overruns and work the board deferred.
2. Start the insurance renewal. Ask your agent when proposed terms and a quote will be ready. Record coverage or deductible questions that could change the budget.
3. Review the reserve study. Compare its costs and remaining-life estimates with current conditions. A fence in Hutto or a pool resurfacing in Cedar Park may need a revised estimate.
4. Collect renewals and bids. Check service contracts, utilities and planned repairs. In a Texas HOA subdivision, proposed services costing more than $50,000 require solicited bids or proposals through an association-established process (Texas Property Code §209.0052(c)). A large services contract, including a management agreement, may trigger this rule; ask your attorney.
5. Draft operating and reserve lines. Show expected income, recurring expenses, reserve contributions and planned capital spending. Mark estimates until the board has supporting information.
6. Hold a board workshop. Test the draft against collection history and the next 12 to 24 months of capital projects. Record questions that need answers before adoption.
7. Notice the adoption meeting. In a Texas HOA subdivision, board meeting notice may be mailed 10 to 60 days beforehand. Alternatively, it may be posted and e-mailed under Texas Property Code §209.0051 at least 144 hours before a regular meeting or 72 hours before a special meeting.
8. Adopt the budget openly. In a Texas HOA subdivision, annual budget approval and assessment increases require an open, noticed board meeting (Texas Property Code §209.0051(h)). Bring the final figures and supporting explanation.
9. Tell owners what changed. Send the adopted budget and assessment information under your governing documents. Explain the costs and projects behind any increase.

Put operating costs and capital needs on separate lines

Split the budget into an operating budget for this year’s bills and a reserve plan for future capital work. That separation makes an operating shortfall visible before it consumes money intended for replacements.

Add projected operating costs, the planned reserve contribution and contingency. Subtract other expected income, then check the remaining assessment need against collection history. Use your declaration’s allocation rules to turn that total into each owner’s assessment.

Use a zero-based review: start each operating line from current contracts, utility trends and planned work. Check management, landscaping, utilities, pool service, insurance and routine repairs one by one. Include administrative costs such as postage, the website, tax returns and an audit or review, plus legal and collections allowances.

A repair may have been a one-time cost, while a changed contract may affect every month ahead. Size the operating contingency from your community’s history and known risks. Keep repairs the board already expects on their own lines.

Use the reserve study to make a funding decision

A reserve study connects future repairs with today’s contributions. It lists shared components, estimates their remaining useful life and replacement cost, and models a funding plan.

Read that plan alongside inspections, bids and approved projects. If a roof’s condition or a contractor’s price has changed, ask how the schedule and contribution should change. Steady contributions help homeowners share the cost of wear over time.

If your association has no current study, list the shared components it maintains. Gather condition and replacement-cost information, then decide what professional review the board needs before setting a contribution.

Ask a reserve specialist about a full update with a site visit when component conditions or completed projects need inspection. If the component list remains sound, ask whether an update without a site visit can refresh costs and funding projections. Compare either update with recent bids.

Percent funded compares reserve cash on hand with the amount the study estimates should have accumulated by now. It reflects that study’s assumptions, rather than a universal passing grade. Ask which costs and useful lives produced the figure before deciding how much to contribute.

We’re not aware of any Texas statute that requires a reserve study or a set reserve-funding level for HOAs or condos. On a Texas HOA subdivision resale certificate (Chapter 207), the association must state reserves, if any, for capital expenditures (Texas Property Code §207.003(b)(6)). On a condo resale certificate (Chapter 82), the association must state the same information (Texas Property Code §82.157(a)(5)).

A buyer in Round Rock may see that disclosed amount. If the board proposes a smaller contribution, show which planned projects need another funding source. Keep reserve cash identifiable in a separate account, with board controls on withdrawals.

Bring the insurance renewal into the draft budget

Get proposed renewal terms before the board settles its assessment figure. Coverage, insured values and deductibles affect annual spending and the cash needed after a loss.

• Compare insured values with the property the association maintains and current repair estimates.
• Review liability limits, directors and officers coverage, and crime or fidelity coverage.
• Identify each deductible and discuss how the association would fund it.
• Ask what changed in coverage limits, exclusions and proposed terms.
• Record unresolved questions and when the board expects an answer.

Hail around Austin makes repair estimates, coverage limits and deductibles worth a close look. Put the proposed premium in the draft when available. Label a pending quote as an estimate and revisit it before adoption.

For a condominium (Chapter 82), Texas Property Code §82.111 requires property insurance on insurable common elements and commercial general liability, to the extent reasonably available. Property coverage must be at least 80% of replacement cost or actual cash value. The board sets the liability amount, which cannot be lower than the declaration requires.

In condo buildings with horizontal unit boundaries, where units may be stacked, the master policy must include units to the extent reasonably available. It need not include improvements and betterments installed by owners (Texas Property Code §82.111).

For damage below the deductible, whoever would be responsible for the repair pays. Above it, the dedicatory instruments (the declaration and related recorded rules) decide who pays the deductible. If they are silent, the board may decide by resolution; without that decision, it is a common expense. The association may assess the deductible to an owner whose act or omission caused the damage (Texas Property Code §82.111).

For a condominium, the insurer must give 30 days’ written notice before cancelling or not renewing. If required coverage isn’t reasonably available, the association must notify owners (Texas Property Code §82.111). That section also applies to pre-1994 condominiums through §82.002(c).

We’re not aware of any Texas statute that requires an HOA to carry insurance. For a Texas HOA subdivision, coverage comes from the declaration, bylaws, lender requirements and the board’s judgment. Use our HOA insurance program page to support the board’s review.

Adopt assessment changes in the right meeting

In a Texas HOA subdivision (Chapter 209), annual budget approval and assessment increases require an open, noticed board meeting. An e-mail vote cannot replace that meeting (Texas Property Code §209.0051(h)).

That section also requires an open meeting for lending or borrowing money. Use the board meeting notice options in §209.0051 when scheduling the vote. If directors meet electronically, each must be able to hear and be heard, while owners must be able to listen. Include access instructions in the notice.

Your declaration may cap how much the board can raise assessments on its own, or require an owner vote for a special assessment. If your declaration requires an owner vote, Chapter 209 lets owners vote by absentee ballot, proxy or electronic ballot (Texas Property Code §209.00592(a-1)). Owner meetings may be held electronically (§209.0056(d)). Chapter 209 does not apply to condominiums, so condo boards should use Chapter 82 and their declarations (§209.003(d)).

Give homeowners a short explanation tied to the proposed figures. Show these three parts when you send the budget or present it at the meeting:

• What changed in fixed bills: Show dollar changes in insurance, utilities and service contracts.
• What the board cut or renegotiated: Name the work deferred or the contract costs reduced.
• What the reserve contribution protects: Name the roofs, pavement, fencing or equipment the transfer helps fund.

This is general information, not legal advice. Your governing documents and your association’s attorney have the final word.

Read a useful financial package each month

Each month, your board should receive a balance sheet, a budget-versus-actual report, bank reconciliations, reserve account statements, a delinquency report and an invoice or accounts-payable list. Together they show cash, unpaid bills, collection trends and why any line differs from the plan.

• Balance sheet: Show operating and reserve cash, receivables and liabilities.
• Budget-versus-actual report: Compare current-month and year-to-date income and spending with approved lines.
• Bank reconciliations: Confirm that recorded balances agree with bank activity for each account.
• Reserve statements: Show transfers, withdrawals and the balance available for capital work.
• Delinquency report: Show how long assessments have been unpaid, alongside collection activity.
• Invoice and accounts-payable list: Identify paid bills, open invoices and items awaiting approval.

Ask whether each material difference is temporary or likely to continue. A seasonal utility bill needs a different response from a service contract that changed for the rest of the year. Track approved capital projects against their budgets as work proceeds.

PS Property Management gives board members dashboards with live bank balances, work orders and architectural requests. Vendor invoices are processed in 1.8 days on average, the board sets its own invoice-approval rule, and we offer free vendor ACH when available. See our HOA accounting information and free HOA board training (nine modules, no sign-up).

Plan for delinquencies without hiding them

Set an allowance using your association’s collection history, then check it against the monthly aging report. Late payments affect cash available for bills even when the budget shows assessments as income.

In a Texas HOA subdivision with more than 14 lots, the association must adopt reasonable payment-plan guidelines (Texas Property Code §209.0062). The minimum plan term is three months. The association need not offer a plan when the balance would take more than 18 months to pay. It also need not offer one to an owner who defaulted on a plan in the prior two years, or more than once in 12 months.

Keep fines distinct from unpaid assessments when discussing collections. In a Texas HOA subdivision, foreclosure is barred when the debt consists solely of fines or attorney’s fees tied only to fines (Texas Property Code §209.009). For a condominium, foreclosure of a lien for assessments consisting solely of fines is barred under §82.113(e).

The allowance does not collect overdue cash. It gives the board a more honest forecast while it follows its collection policy and reviews changes each month.

Budget for a condominium’s building obligations

A condominium budget must account for the shared building components its declaration assigns to the association. Start with that maintenance list when reviewing reserves, insurance and planned projects.

For a condominium (Chapter 82), the board may adopt and amend budgets for revenues, expenditures and reserves, unless the declaration says otherwise (Texas Property Code §82.102(a)(2)). Where Chapter 82 applies in full, common expenses include allocations to reserves (§82.003). A roof, elevator or shared mechanical system can make that plan especially significant.

A condominium association must obtain an independent audit of its records annually as a common expense (Texas Property Code §82.114(c)). Put its cost in the operating budget. Sections 82.102(a)(2) and 82.114 also apply to pre-1994 condos through §82.002(c).

Chapter 82 applies in full when the declaration was recorded on or after January 1, 1994 (Texas Property Code §82.002). An older condominium can adopt the whole chapter by amending its declaration. Otherwise, only the sections listed in §82.002(c) apply. Check the declaration when deciding which provisions govern your community. See our condo management information for more on shared-building work.

Catch these budget mistakes before adoption

Check the assumptions behind the draft before the board votes. These mistakes can leave known costs out of the assessment or make reports harder to use.

• Copying last year: Recheck contract scope, current prices and expenses that will not repeat.
• Choosing dues first: Show the effect of a lower reserve contribution on planned work.
• Ignoring the study: Compare its component list with current conditions and project bids.
• Guessing on insurance: Identify renewal terms and any quote still pending.
• Skipping contingency: Allow for uncertainty without burying a known repair.
• Surprising owners: Explain material changes before the adoption meeting.
• Voting informally: Schedule the required open meeting and notice for a Texas HOA subdivision budget or assessment increase.

Frequently asked questions

When should an HOA board start the budget?

About three to four months before the fiscal year begins is a useful starting point. Work backward from adoption and allow time for insurance terms, contract figures and reserve review. Start earlier if those items need more work.

Does Texas require a reserve study or a minimum reserve balance?

We’re not aware of any Texas statute that requires a reserve study or a set reserve-funding level for HOAs or condos. On a Texas HOA subdivision resale certificate (Chapter 207), the association must disclose reserves, if any, for capital expenditures (Texas Property Code §207.003(b)(6)). On a condo resale certificate (Chapter 82), the association must disclose the same information (§82.157(a)(5)).

What does percent funded mean?

It compares current reserve cash with the amount a reserve study estimates should have accumulated by now. The figure depends on the study’s component costs and remaining-life estimates. Use it to discuss a funding gap, not as a universal target.

Can the board adopt the budget or raise dues by e-mail?

In a Texas HOA subdivision (Chapter 209), annual budget approval and assessment increases require an open, noticed board meeting (Texas Property Code §209.0051(h)). An e-mail vote cannot replace that meeting. Chapter 209 doesn’t apply to condominiums (§209.003(d)), so a condo board should check Chapter 82 and its declaration.

How does insurance renewal affect the budget?

The renewal may change annual cost, coverage or the cash needed for a deductible. Request proposed terms and label a pending quote as an estimate. For a condominium (Chapter 82), property and liability requirements apply to the extent coverage is reasonably available (Texas Property Code §82.111). We’re not aware of any Texas statute that requires an HOA to carry insurance. For a Texas HOA subdivision, coverage comes from the declaration, bylaws, lender requirements and the board’s judgment.

How should we budget for delinquencies?

Use collection history to set an allowance, then check it against the monthly aging report. In a Texas HOA subdivision with more than 14 lots, payment-plan guidelines must meet Texas Property Code §209.0062, including its three-month minimum and exceptions. In a Texas HOA subdivision, fines-only debt and attorney’s fees tied only to fines cannot support foreclosure (§209.009). For a condominium, a lien for assessments consisting solely of fines cannot be foreclosed (§82.113(e)).

How is a Texas condo budget different?

For a condominium (Chapter 82), the board may adopt budgets for revenues, expenditures and reserves unless its declaration says otherwise (Texas Property Code §82.102(a)(2)). The association must obtain an annual independent audit as a common expense (§82.114(c)). Shared building components and master insurance can shape its funding choices.

Can the board lower reserve contributions to avoid an assessment increase?

Review the governing documents and reserve study before changing the contribution. Show which repairs could need another funding source if the board saves less now. Present that choice with the proposed assessment so owners can see the full cost. Our HOA FAQ offers more board resources.

Talk to PS Property Management

This is general information, not legal advice. Your governing documents and your association’s attorney have the final word.

PS Property Management has served Central Texas communities since 1987. If your board wants a management partner for budget season and the rest of the year, we’d be glad to talk.

Pricing is custom to your community — request a proposal or call (512) 251-6122, Monday through Friday, 9 to 5.

“Hail around Austin makes repair estimates, coverage limits and deductibles worth a close look.”