Definition
Funds an HOA sets aside for major future repairs and replacements of common-area assets, like roofs, roads, and pools.
Capital reserves (or the reserve fund) are savings set aside for large, infrequent replacements of common-area components — roofs, roads, pools, painting, fencing. Unlike operating funds, they build up over years for expenses that don't recur often but cost a lot.
Adequate reserves are the best protection against special assessments: when the money is already there, a big repair doesn't become a surprise bill. Underfunding reserves is the most common and most damaging financial mistake an HOA can make.