Reserves, Special Assessments and Association Loans at The Royalton: How a Repair Gets Paid For

What are you asking for when you ask about reserves at The Royalton?

Three different questions hide inside the word reserves, and a buyer at a showing usually asks only the first of them. The place to start is where an association's money comes from at all. Unless the declaration provides otherwise, Section 82.102(a) of the Texas Property Code lets the association, acting through its board, adopt and amend budgets for revenues, expenditures and reserves, and collect assessments for common expenses from unit owners. A common expense is a cost of running the building as a whole rather than one home inside it, and an assessment is the bill an owner receives for that owner's share of it.

The rhythm underneath the figure is annual, which is why a reserve balance is a budget decision rather than a fund with a lock on it. Section 82.112(a) provides that after an initial assessment by an association, assessments must be made at least annually and must be based on a budget adopted at least annually by the association. The same subsection keeps the association's reserves and the unit owners' working capital contributions away from operational expenses until declarant control terminates.

The chapter reaches this building in full, because it applies to condominiums for which the declaration is recorded on or after 1 January 1994, and this tower's condominium regime dates from the December 2004 conversion. A condominium whose declaration was recorded before that date gets only the shorter list of sections Section 82.002(c) sets out, unless the owners of units vote to amend the declaration to have the chapter apply and that amendment is filed for record, or a declaration or amendment recorded before 1 January 1994 states that the chapter will apply in its entirety on 1 January 1994. So a rule read here travels to an older building only once those two questions have been answered.

Three routes carry the cost of a large repair to an owner, and each has a different decision maker behind it: reserves the association already holds, a special assessment levied on every home, yours included, after you close, and a loan the board takes out by resolution. The monthly assessment itself, what it covers and how it is allocated between the homes here, sits on the site's page on HOA fees at The Royalton.

How does the cost of an unplanned repair reach an owner here?

This building has an unplanned repair in its own record. An underground water line serving the fire sprinkler system broke on 11 August 2022, water flooded the lower level, a section of ground slab heaved, and the 33-story tower was evacuated; the engineers who inspected the next day reported that they did not identify conditions representing an immediate concern to the structural integrity of the building's primary vertical and lateral systems. The site's account of the 2022 evacuation and what the engineers reported sets out the rest of that record.

Insurance comes first in the statute's order. Section 82.111(i) provides that, except as that section provides, any portion of the condominium for which insurance is required that is damaged or destroyed shall be promptly repaired or replaced by the association, and three things displace that duty: termination of the condominium, illegality of the repair or replacement under any state or local health or safety statute or ordinance, and a vote in which at least 80 percent of the unit owners vote to not rebuild.

Then comes the sentence the whole subject turns on, and it opens with a condition of its own. Except as that section provides, the cost of a repair or replacement above the insurance proceeds is a common expense, and the board may levy an assessment to pay it in accordance with each owner's common expense liability. Common expense liability is the share of the building's costs the recorded declaration allocates to each home, so one repair can reach two homes here as two different numbers.

The deductible is three rules rather than one, and each has its own trigger. Where the cost to repair damage to a unit or common element covered by the association's insurance is less than the applicable deductible, Section 82.111(j) puts the cost on the party who would be responsible for the repair in the absence of insurance. Where the association's insurance provides coverage for the loss and the repair costs more than the deductible, Section 82.111(k) sends payment of the deductible, and of costs incurred before insurance proceeds are available, to the dedicatory instruments first, then to the board, which determines payment by resolution where those instruments are silent, and where the board approves no resolution the costs are a common expense; a resolution under that subsection is itself considered a dedicatory instrument and must be recorded in each location in which the declaration is recorded. Where damage to a unit or the common elements is due wholly or partly to an act or omission of any unit owner or a guest or invitee of that owner, Section 82.111(l) lets the association assess the deductible expense and any other expense in excess of insurance proceeds against that owner and that owner's unit.

What a closing makes you is written in Section 82.117. Subject to the declaration, the bylaws, the rules of the association and the chapter, the unit owner shall pay assessments, interest and other charges properly levied by the association against the owner or the owner's unit, and shall pay regular periodic assessments without demand by the association. An assessment levied after you close is yours. Section 82.111(i) puts the step that creates it in one sentence.

Can the association borrow instead of levying a special assessment?

Texas gives a condominium board a third way to pay for a repair, and it is the one a buyer almost never asks about. Except as provided by Subsection (g), Section 82.102(f) lets the association, by resolution of the board of directors, borrow money and assign as collateral for the loan authorized by the resolution the association's right to future income, including the right to receive assessments, and the association's lien rights. That subsection calls for no owner vote of its own.

Subsection (g) carries the exception in full. If a dedicatory instrument requires a vote of members of the association to borrow money or to assign the association's right to future income or the association's lien rights, the loan or assignment must be approved as provided by the dedicatory instrument. The board may determine whether a vote for that purpose may be cast electronically, by absentee ballot, in person or by proxy at a meeting called for that purpose, or by written consent. If a lower approval threshold is not provided by the dedicatory instrument, approval requires the consent of owners holding 67 percent of all voting interests. A dedicatory instrument is one of the association's own governing documents, and the declaration and the bylaws are the two a buyer meets first.

For somebody about to make an offer, a loan the association already carries is repaid out of the same assessment income that pays the staff and the insurance, which puts it inside the monthly fee for as long as its term runs. A question that asks only about special assessments does not reach it.

One document asks about it directly, and it belongs to a lender: the Condominium Project Questionnaire, published as Fannie Mae Form 1076 and Freddie Mac Form 476. Its three loan questions are the three to put in writing. Has the association obtained any loans to finance improvements or deferred maintenance. What amount was borrowed. What are the terms of repayment. Put them to the seller's agent before you write the offer rather than after, because the answers change what the monthly fee is paying for.

What this association has done about any of that sits in its own board minutes and financial records, and those reach a buyer through the seller. Subject to the exception in Subsection (g), Section 82.102(f) states the power this way.

Which documents state the reserves, the assessments and any loan?

Four statements on the resale certificate matter to a repair, and two of them carry the words if any, which a reader should keep. Capital expenditures, if any, approved by the association for the next 12 months. The amount of reserves, if any, for capital expenditures and of portions of those reserves designated by the association for a specified project. Whether the board has received notice from a governmental authority concerning violations of health or building codes with respect to the unit, the limited common elements assigned to that unit, or any other portion of the condominium. And the association's current operating budget and balance sheet.

The third of those earns its place because a code notice about any other portion of the condominium is a repair obligation before it is an assessment. Somebody has to answer the notice, and the money that answers it comes from one of the three routes above.

Three limits ride on the certificate itself. Under Section 82.157(b), the association is not liable to a selling unit owner for delay or failure to furnish one; an officer or agent of the association is not liable for a delay or failure unless that officer or agent willfully refuses to furnish the certificate or is grossly negligent in not furnishing it; and failure to provide a certificate does not void a deed to a purchaser. One protection sits in the same place. Under Section 82.157(c), where a properly executed resale certificate incorrectly states the total of delinquent sums owed by the selling unit owner to the association, the purchaser is not liable for payment of additional delinquencies that are unpaid on the date the certificate is prepared and that exceed the total sum stated in the certificate.

The certificate carries none of the next three, and each has to be requested by its own name. Minutes of meetings of the association and board, which Section 82.114(a) requires the association to keep. The independent audit of the records that the association obtains annually as a common expense, with copies made available to unit owners. And the financial records themselves, which under Section 82.114(b) shall be reasonably available at the association's registered office or its principal office in this state for examination and production in accordance with Section 82.1141.

The route almost nobody uses is the meeting. Meetings of the association and board must be open to unit owners, subject to the right of the board to adjourn a board meeting and reconvene in closed executive session to consider actions involving personnel, pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual unit owners, or matters that are to remain confidential by request of the affected parties and agreement of the board, with the general nature of that business announced first at the open meeting. On the written request of a unit owner, the association must inform that owner of the time and place of the next regular or special board meeting. Both of those rights belong to an owner rather than to somebody thinking about buying, so a buyer reaches them through the seller.

The certificate's other statements, the clocks a contract runs on, the other tests a lender applies, the lender's 10 percent reserve requirement, the definition of a critical repair and what a management certificate states are set out on the site's page on the documents that change an offer.

Does Texas require a condominium to have a reserve study?

Chapter 82 of the Texas Property Code, read in full on 19 September 2026, requires the amount of reserves to be disclosed if there is one, through the resale certificate's statement of the amount of reserves, if any, for capital expenditures and of the portions designated for a specified project. Section 82.112(f) adds a permission rather than a duty: a declaration may allow the accumulation of reserve funds for an unspecified period to provide for any anticipated expense of the condominium.

The chapter as published contains no requirement that a condominium association commission a reserve study. Chapter 209, the statute most people have heard of, reaches somewhere else: it applies only to a residential subdivision that is subject to restrictions or provisions in a declaration authorizing the property owners' association to collect regular or special assessments on all or a majority of the property in the subdivision, and Section 209.003(d) states that it does not apply to a condominium as defined by Section 81.002 or 82.003.

What a reserve study has to be is a real question with a published answer, and that answer comes from a lender. Fannie Mae's Selling Guide requires a study to be prepared by an independent third party with specific reserve study expertise, which may include a reserve study professional with reserve study credentials, a construction engineer, a certified public accountant who specializes in reserve studies, or any professional with demonstrated knowledge of and experience in completing reserve studies.

Whatever format it takes, the guide requires the study to address all major components and elements of the project's common areas for which repair, maintenance or replacement is expected; the condition and remaining useful life of each major component; an estimate of the cost of repair, replacement, restoration or maintenance of major components; an estimate of the total annual contributions required to defray those costs, minus the existing reserves funded for this purpose and including inflation; an analysis of existing funded reserves; and a suggested reserve funding plan.

Two conditions decide whether a study is worth reading rather than worth owning. A lender may review the most current reserve study or an update, provided it has been completed within three years of the date on which the lender approves the project. And a study may establish a funding goal that allows the reserve cash balance to approach, but never fall below, zero during the projection, often called the baseline funding method, which may not be used to waive the lender's 10 percent reserve requirement. The guide carries its own note that a reserve study used by the lender in its analysis must meet or exceed the requirements set forth in relevant state statutes.

What does a lender ask the association about all of this?

The form is the Condominium Project Questionnaire, Fannie Mae Form 1076 and Freddie Mac Form 476, whose footer carries March 2016 with an addendum added December 2021. It is sent to the association or its management company on behalf of an individual seeking mortgage financing to purchase or refinance a unit in the project, and the lender needs the information to determine the eligibility of the project for mortgage financing purposes. A buyer can ask for the same answers without waiting for a lender, which is what makes it useful as a request list.

In the form's own order: does the project have a funding plan for its deferred maintenance components or items to be repaired or replaced, and is there a schedule for them; has the association had a reserve study completed on the project within the past 3 years; what is the total of the current reserve account balances; are there any current special assessments unit owners are obligated to pay, and if yes, the total amount, the terms and the purpose; are there any planned special assessments owners will be obligated to pay, and if yes, the amount, the terms and the purpose; and then the three loan questions set out above.

Two further items on the same form are worth asking for in writing. It asks how many unit owners are 60 or more days delinquent on common expense assessments. And it instructs the answering party to provide a copy of the inspection and board meeting minutes to document findings and action plan.

Why the answers decide something comes from the lender's own guide, and each of these is that lender's rule rather than Texas law. A project with an evacuation order due to an unsafe condition, either for a partial or total evacuation of the project's buildings, is ineligible until the unsafe condition has been remediated and the buildings are deemed safe for occupancy. Where a structural or mechanical inspection was completed within 3 years of the lender's project review date, the lender must obtain and review the inspection report, which cannot indicate that any critical repairs are needed, that any evacuation orders are in effect or that any regulatory actions are required; where the report indicates unaddressed critical repairs, the project is ineligible until the required repairs have been completed and documented, and the lender reviews an engineer's report or substantially similar document to determine whether the completed repairs resolved the concerns. And where a special assessment is associated with a critical repair and the issue is not remediated, the project is ineligible.

One condition narrows all of it. If damage or deferred maintenance is isolated to one or a few units and does not affect the overall safety, soundness, structural integrity or habitability of the project, those requirements do not apply. Critical repair is a defined term in that guide, and how any one project stands against any one of these tests is a lender's answer, given as of a note date rather than published anywhere.

What can you look up about this association before you write anything?

Two public records cost nothing. The first is the state's record of the association as a corporation: the Texas Comptroller's active franchise taxpayer file lists Royalton at River Oaks Council of Co-Owners, Secretary of State file number 0800463946, chartered 8 March 2005, with an active status. That name is the useful part, because the county's real property index is searched by name and this is the name to search.

The second is the county record. A management certificate for this association is on file in the Harris County Clerk's real property records under file number 20130592577, recorded 25 November 2013. Section 82.116(b) requires an association to record an amended management certificate not later than the 30th day after the association has notice of a change in any information in a recorded certificate, and Section 82.116(b-1) requires it to be filed electronically with the Texas Real Estate Commission not later than the seventh day after it is filed for recording. So pull the current instrument from the clerk rather than working from a file number recorded in 2013. A management certificate is the association's own recorded statement of the information the statute requires it to keep current.

What can this page not tell you?

This association's reserve balance, its operating budget, its assessment history, whether any special assessment is current or planned, whether it has ever commissioned a reserve study, whether it has borrowed and on what terms, its insurance deductibles and how the 2022 claim settled all sit with the association, in its budgets, its minutes, its annual audit and its insurance file, and a buyer reaches them through the seller. What the 2022 repairs cost and how they were funded sits in the same place.

The share of every figure above that falls on one home comes from the schedule of allocated interests, which is an exhibit to the recorded declaration. This site has not obtained it, and the seller furnishes the declaration with the rest of the association documents.

Whether a loan can be made on this project today is decided by the lender that is asked, on the day it reviews the project, and that decision can change when the lender learns something new. And whether the 2013 management certificate is still the operative one is answered by the county clerk's current index rather than by that row.

Take that list to your agent before you write the offer, and ask which document answers each question and who has to produce it.