The section was created by 2003 Wisconsin Act 283 and amended by 2021 Wisconsin Act 168. Everything below summarizes the text on the Legislature's site and is not legal advice. Where your documents and this page disagree, your documents and the association's attorney win.
What the account is
The statute defines a statutory reserve account as "a separate account established under this section to hold reserve funds." Separate is the working word. A line called "reserves" inside the operating account does not count. A statutory reserve account statement is the recorded document that says whether such an account has been established.
Who it covers
- Residential condominiums. The section applies to condominiums made up entirely of residential units.
- Mixed-use condominiums only if the declarant or the association elects to be covered, with the written consent of a majority of the unit votes in each category.
- Small condominiums, which s. 703.02 defines as having no more than 12 units, only if the declarant or the association elects in, with a majority of unit votes.
- Reserve accounts that already existed on November 1, 2004, and other reserve accounts that are not statutory ones, are left alone.
Two starting points
Created on or after November 1, 2004
The declarant sets up the account when the condominium is created, signs a statutory reserve account statement and fixes the annual reserve assessment. During declarant control the declarant can instead elect not to have an account, or end one, by signing a statement saying so. If that happens, the owners decide for themselves at the first annual meeting after declarant control ends, or at a special meeting within a year of it, and setting up an account takes the written consent of a majority of the unit votes.
Created before November 1, 2004
The association had 18 months from November 1, 2004, or from the end of declarant control if that came later, to set up an account. It could instead elect not to, with the written consent of a majority of the unit votes. Either way, it signs a statement.
Changing your mind later
An association that opted out, or ended its account, can set one up at any time with the written consent of a majority of the unit votes. An association with an account can end it the same way, except that an account the declarant set up cannot be ended until declarant control is over. Every change means a new signed statement.
Each statement must carry the condominium's name exactly as it appears in the declaration, follow the standard format for recorded documents, and be recorded with the register of deeds of the county where the condominium instruments are recorded. That makes the register of deeds the first place to look if nobody on the board remembers which way the association went.
Setting the reserve contribution
If there is an account, each annual budget must provide for reserve funds. When it sets the amount, the association must consider:
- the reserve funds already in the account;
- the estimated cost of repairing or replacing common elements, other than routine maintenance;
- the estimated remaining useful life of those common elements;
- how much of that cost the account is meant to cover, as opposed to special assessments or other means;
- any other factor the association considers relevant.
Items two and three are, almost word for word, what a reserve study produces: a component list with replacement costs and remaining lives. Nothing in the section requires a study, but a board that sets reserves without one is estimating those figures some other way, and it should be able to say how.
Section 703.161 also requires the annual budget of any condominium with a residential unit to show the amounts allocated to a statutory reserve account and the amount held in it.
Spending the money
Reserve funds may be spent on repairing and replacing common elements, other than routine maintenance. They can be used for ordinary repairs, customary services or operating costs that run over the budget and any contingency fund, but only with the written consent of at least two-thirds of the unit votes, and money taken that way "must be replaced within 3 years from the date of withdrawal."
In short: the statute tells you to have the account and to think hard about the number. It does not tell you the number.
Where a study fits
A reserve study gives the board a defensible answer to the questions in sub. (7) and a funding plan to put in front of owners. For associations that opted out, it is still the clearest way to see what special assessments are coming. Our cost guide covers fees, and the form below finds one firm that works in your county.
Sources: Wis. Stat. 703.163, 703.161 and 703.02, Wisconsin State Legislature.