Could Your HOA Be Violating NRS 116.3115 Without Knowing It?

Recent reporting shows that many Nevada HOAs are not properly funding their reserve accounts—and that is more than a budgeting problem. According to the Commission for Common‐Interest Communities & Condominium Hotels, associations are missing key compliance marks on reserve funding, reserve studies, and special assessments.

This matters because under Nevada Revised Statute 116.3115 (“NRS 116.3115”), associations are required to “establish adequate reserves, funded on a reasonable basis, for the repair, replacement and restoration of the major components of the common elements…”

If your board is not properly funding the reserves and is hoping this problem will solve itself, it might be time for legal counsel.

What the Law Requires (and Where Many HOAs Are Falling Short)

• Statutory requirement: Under NRS 116.3115 (2)(b), an association must either fully fund reserves or adopt a funding plan that is “designed in an actuarially sound manner” so that when major repairs/replacements are needed the money is available.
• Reserve studies required: The law (and supporting regulations) require that associations not only conduct reserve studies at least every five years but review them annually, if not more often, and adjust funding plans as needed.
• Board actions possible without owner vote: Importantly, even if governing documents impose assessment constraints, the board may impose “any necessary and reasonable assessments” to meet the reserve funding plan without owner approval—so long as the funding plan is based on the study.
  
  

Where HOAs are faltering:

According to the reporting:

• Surprisingly, many associations never conducted a proper reserve study or failed to act on it.
• Boards have allowed “due from/due to” accounting items related to reserve accounts to go unchecked (i.e., operating funds being borrowed without replenishment).
  Some boards refuse to raise assessments or transfer money into reserves out of fear of upsetting their membership—even though the risk to property value and legal exposure is rising.
  
  

Why NRS 116.3115 Compliance is a Legal Risk for Boards

• Fiduciary duty exposure: Board members are obligated to act in the best interests of the association and homeowners. Failing to ensure adequate reserves may be seen as neglecting that duty—and risk litigation, regulatory scrutiny, or special reserve assessments that draw homeowner ire.
• Special reserve assessments and unexpected costs: If reserves are underfunded when major replacement events hit (e.g., roof, pavement, landscaping), the board may be forced to impose special reserve assessments—or worse, be accused of mismanaging community finances.
• Regulatory action: As the commission noted, they are seeing more cases where associations are ordered to perform audits, special assessments, bring in managers, or otherwise remediate after the fact.
• Homeowner relations and property values: Even from a non-legal angle, homeowners are sensitive to deteriorating common elements or surprise assessments. That can erode trust in the board and increase turnover or litigation risk. Underfunded reserves may even lead to declining property values as compared to surrounding neighborhoods.
  
  

What Your Board Should Do Now

1. Review your most recent reserve study (or get one if you don’t have one). Confirm whether it is current, and check whether recommended funding levels are being met.
2. Compare actual reserve funding to the study’s projections. If there is a deficit (or large “due from/ due to” balances), the board must assess whether the funding plan needs adjustment.
3. Develop or update a funding plan that meets “actuarially sound” criteria. The law doesn’t require 100% immediate funding in all cases—but it requires a plan that makes sense and will deliver the funding when needed. (See NAC 116.425 for more details on what “adequately funded reserves” means).
4. Ensure transparency with homeowners. Communicate regularly (ideally quarterly) on reserve fund status, funding plans, and any upcoming special assessments. Boards that bury bad news tend to face bigger issues, and bigger assessments, later.
5. Seek legal counsel early. If your association is behind, the board should move proactively. Ignoring the issue increases the risk of regulatory action, special assessments, or litigation.
   
   

How Isaacson Law Can Help

At Isaacson Law, we work with HOA boards, community managers, and executive committees to:

• Interpret NRS 116.3115 (and related regulations) and advise on funding obligations and exposure.
• Review governing documents and budgets for reserve‐fund compliance.
• Assist boards in developing or defending funding plans, including special reserve assessment strategies and communication plans.
• Provide guidance when regulatory scrutiny arises or when a homeowner dispute escalates.

If your association is uncertain about its compliance with reserve funding requirements, or you’d like a legal review of your board’s exposure, contact us today for a consultation.

Call Us

If your board hasn’t reviewed its reserve funding plan in the last 12 months, now is the time. Don’t wait until deferred maintenance becomes an emergency—and legal risk. Visit Contact Us to schedule an assessment of your reserve‐fund strategy and legal exposure.