Handling Reserves After Florida’s SIRS Regulations: What Experts Advise for Financial Reporting
Florida’s Structural Integrity Reserve Study (SIRS) requirements have changed the way condominium and co-op boards think about reserve funding. What was once a matter of financial preference is now, in many cases, a legal obligation.
For boards navigating SIRS compliance, one of the most pressing questions is how reserves should be structured and reported on financial statements. Should SIRS-related reserves be pooled with other funds, kept separate, or tracked by individual component?
We spoke with CPAs, attorneys, and community association professionals across Florida to find out what they recommend.
Note: For a general overview of how pooled and component reserve methods work, see our companion post: Pooled vs. Component Reserves: What HOA and Condo Boards Need to Know.
What Is SIRS and Who Does It Apply To?
The Structural Integrity Reserve Study (SIRS) is a Florida law requiring condominiums and co-ops with three or more habitable stories to set aside reserves for structural components critical to building safety.
These components include:
- Foundation
- Roof
- Load-bearing walls
- Plumbing
- Electrical systems
- Windows and exterior doors
- Fireproofing and weatherproofing
Key Requirements
- Applies to condominiums and co-ops, not townhomes
- Covers any item with deferred maintenance or replacement costs over $25,000
- SIRS completion deadline: December 31, 2025
- Associations may temporarily pause SIRS funding for up to two budget cycles (with majority owner approval) if major structural work required by the Milestone Inspection is underway. Funding must resume by December 31, 2028. If the Milestone Inspection is being done in conjunction with the SIRS, the deadline can be extended until December 31, 2026.
Why It Matters
The SIRS requirement was designed to ensure building safety and prevent underfunded reserves that can lead to costly special assessments or serious safety risks. The law came in the wake of the Surfside Champlain Towers South collapse and is intended to hold boards accountable for budgeting responsibly and maintaining sufficient funds for structural repairs.
Pooled or Component: Which Method Works for SIRS Compliance?
Florida law does not mandate one reserve method over the other. However, the way a board structures its reserves for financial reporting has real implications for compliance, transparency, and risk management.
Nicole Johnson of Hafer LLC reports that more than 90% of her clients use pooled reserves. She advises keeping SIRS funds separate from other reserves to avoid commingling. Boards, she warns, can be held liable for failing to meet SIRS requirements. “It’s no excuse if owners can’t afford it,” she says. “The board must comply with the law.”
Catie Phillips, LCAM, CMCA, of Rosenbaum PLLC recommends straight-line funding for condos managing SIRS obligations. She notes that associations can pool SIRS funds and should include a 10 to 30 percent contingency in budgets to account for rising material costs. While pooled reserves offer flexibility, component reserves provide discipline and clarity when managing large structural budgets.
Seth Halperin, CPA at Lanzaro & Halperin CPAs, prefers pooled funding for its flexibility and ease of administration but emphasizes that SIRS components must be tracked separately regardless of the overall funding method. He recommends maintaining at least three months of operating cash and fully funding reserves to avoid burdening future owners.
Funding SIRS Shortfalls: Loans, Lines of Credit, or Special Assessments?
One of the biggest challenges boards face is how to close the gap between current reserves and what SIRS compliance requires. Many associations are discovering significant shortfalls, and the question of how to fund them is a critical one.
Andrew Black, Esq., B.C.S., of Kaye, Bender, Rembaum Attorneys at Law, points out that Chapter 718, Florida Statutes, allows bank loans and lines of credit to fund SIRS requirements. Whether to pursue this option is a business decision of a majority of the board. He advises that, to ensure compliance with the required membership vote, boards should contact legal counsel before moving forward.
This means boards are not limited to special assessments as their only tool for closing reserve gaps. A bank line of credit can spread the cost over time and reduce the immediate burden on homeowners, though it introduces debt service as an ongoing expense.
How Should SIRS Reserves Appear on Financial Statements?
Regardless of whether a board uses pooled or component funding overall, SIRS reserves must be tracked with enough specificity to demonstrate compliance. Here is what the experts recommend.
Boards Must
- Maintain separate general ledger accounts for SIRS reserves
- Fully fund reserves to meet future obligations for SIRS-covered components
Boards Should
- Communicate funding strategies and SIRS compliance status clearly to homeowners
- Seek professional guidance from CPAs, attorneys, engineers, and reserve specialists
- Maintain a separate bank account for SIRS reserves (not legally required, but a best practice)
- Be aware that existing SIRS-related components cannot be moved to a new SIRS pool without a unit owner vote
The Bottom Line for Florida Boards
SIRS compliance is not optional, and the financial reporting decisions boards make today will have lasting consequences. Whether your association uses pooled or component reserves, the critical factor is that SIRS-covered components are properly funded, clearly tracked, and transparently reported to homeowners.
Boards that invest in professional guidance and maintain disciplined financial practices will be best positioned to protect their communities, comply with the law, and avoid the costly surprises that come with underfunded reserves.
Need help structuring your SIRS reserves or getting your financial reporting in order? Our Solutions Manager can walk you through the options and help your board find the right setup for compliance and clarity.
